Against the background of an aggressive and constantly shifting legislative and taxation environment, the international trust industry has had to evolve in a way which few could have imagined ensuring the efficient transfer of wealth between generations. The industry today includes both trusts and foundations, and structures can be set up to accommodate the requirements of the most demanding of international clients. This rapid development means that the idea of a one size fits all trust is no longer an option for those considering long term, cross generational wealth planning. Trusts and foundations today are bespoke, can be multi-jurisdictional and may also include professional protectors and guardians. Questions arise regarding, how can the modern day trustee sustain a balance between the requirements of cost containment and first class professional support? How should a client choose between an independent trust provider, a bank, a lawyer, or an accountant as their service provider, who in many circumstances is intended to last longer than the life of the original Settlor? Today's discerning client still demands value for money, excellent customer service and a fair and transparent pricing structure, all backed up by a reputable organisation and professional employees.
As well as price and administration, the client will need to think about fund structure, fund management, whether the structure will hold alternative investments such as hedge funds or luxury items such as wine and antiques. All of these f actors will impact upon the choice of trustee which might be a bank, a lawyer or a professional trust company. The choice must ultimately be a compromise driven by the personal objectives of the client, and more importantly, their vision as to how the trust or foundation is to be run today and in the future.
Banks for example, generally insist on managing a client's money as well as being the trustee, which will immediately limit the style and scope of any structure. Lawyers are very good at drafting complex trust documentation, but often do not have the required expertise in the management of assets. In many circumstances an independent trust provider could be better value for money.
Whilst the price of the service is undoubtedly a factor, the chemistry between the client and the trust provider also needs to be right, as ultimately, choosing a provider is as much about forming a partnership than it is about the cost of the service. The starting point of any long term relationship for a client is to ascertain if the trustee has the ability to service his or her individual needs, how flexible the provider can and will be, in how much detail they will consider the client's current lifestyle and what expectations and ambitions they have for the future and the future generations of their families or selected beneficiaries.
Other important qualities to look for when selecting a trustee are stability, dependability, financial experience and the ability to devote time and energy on an impartial basis for the benefit of all beneficiaries.
The next step is to ensure that the trust company has the right skill set, is in a suitable geographical location for the structure and provides the specific services the client requires. There are many reputable and well regulated jurisdictions to chose from, one of them being the offshore island of Jersey. The Island is an internationally recognised, highly respected and well established trust, company and fund-structuring jurisdiction.
There is a strong finance industry populated by the world's leading accounting, tax, legal and administration firms, all of whom can be on call for clients.
Some practical issues may dominate, in which case the trustee selection becomes much easier:
- The location of the assets. Real estate for example, has a fixed, physical location, so those trustees who are more familiar with the financial and tax implications of the country where the property is located should be given preference.
- The type of assets. Tangible or intangible? Management of each requires a greatly different skill set.
- Does the trustee have an understanding of the intra-family dynamics of all the beneficiaries?
- What specific asset class management ability does the trustee have?
- If a family business is at the core of the structure, does the trustee have an understanding of the nature of the business?
- Will the trustee have the legal capacity to interpret and administer the agreement fairly to all beneficiaries? Can they, for example, provide professional protectors and guardians in the case of foundations? In the past, the protector or guardian could have been a member of the family or close personal friend, now however paid professionals may be preferred.
A good trustee will offer a wide range of services in house, but they will also be comfortable working with a client's own professional support network to manage investments and trusts for a wealthy family or a group of families. The type of product range that an expert trustee will offer may include traditional private client discretionary trusts augmented by reserved powers structures, foundations, PTCs, structures designed to own operating companies, specialist investment funds, international pension plans, QROPS/QNUPS structures, and in some cases marine and aviation services.
Other examples of the requirements of individuals or families may include:
- A private trust company or foundation to hold complex and large scale business assets in various parts of the world. Assets will generally be accepted on the proviso that the organisation fully understands the operating entities, the corporate governance of these businesses, and the nature of their business, transaction flow and decision making.
- Holding vehicles as a pre-cursor for listing businesses on international exchanges. For clients that run successful businesses in regions such as Asia or Russia these services can be an essential way of providing wealth planning with accompanying structures such as PTCs, trusts and foundations around such shareholdings.
- Some families may require a small bespoke private fund. Examples may include a wine fund and an investment property fund.
Administering each of these requires skilled and customer oriented professionals who will carefully select the most suitable structure for the client and administer it with due diligence on a daily basis. Establishing the right solution for the client should be the most important goal for any trustee, as client longevity and service quality can only be achieved through establishing and maintaining robust client relationships across generations.
Faced with an increasingly complex set of demands from clients, many trustees are moving away from traditional time-cost trust and company administration menu pricing towards a more intimate client-oriented, bespoke pricing model. Another model popular with clients in emerging markets and the Far East in particular is the certainty of fixed fees.
The need for a very strong focus on cost effective service delivery is absolutely paramount. Client servicing costs can easily spiral in high cost jurisdictions and trust companies must consider how technology and process improvement programmes can be applied to systematise routine administration work and ensure servicing costs are kept as low as possible.
Today's trust and foundation structures can be complex, international vehicles, but at their core, they will only succeed if the correct skill set has been assembled and the personal chemistry is right between the client and his trust or foundation provider. Cost will play a role in this mix, but many clients are likely to be pleasantly surprised by just how much value a modern, technology driven global trust company is able to offer its clients.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.