Broker Check

Financial Advisor As a Trustee

April 10, 2024

Choosing a trustee is a critical decision when establishing a trust. The trustee plays a pivotal role in managing trust assets and ensuring that the grantor’s wishes are carried out effectively. In this section, we discuss the pros and cons of having a financial advisor as a trustee.

Options:

A trustee has many choices, including family members, financial advisors, and professional fiduciaries.

Knowledge in Financial Matters:

One of the primary benefits of choosing a financial advisor as a trustee is their knowledge of financial matters. Financial advisors possess specialized knowledge in investment strategies, asset allocation, tax planning, and wealth management. This guidance can be invaluable when managing trust assets and maximizing their growth potential while mitigating risks.

Alignment with Grantor’s Financial Goals:

Financial advisors are trained to understand their clients’ financial goals and objectives thoroughly. Trustees can apply this understanding to ensure the trust’s investment and distribution strategies align closely with the grantor’s intentions. Financial advisors can help preserve and grow trust assets over time by clearly focusing on the grantor’s objectives.


Integration of Financial Planning Strategies:

Financial advisors bring a holistic approach to trust administration by integrating financial planning strategies into their trustee duties. They can leverage their knowledge to optimize tax efficiency, establish appropriate risk management strategies, and coordinate estate planning efforts. This comprehensive approach ensures that all aspects of the grantor’s financial plan work together seamlessly to achieve the intended objectives.


Considerations and Challenges:

Despite the numerous benefits of using a financial advisor as a trustee, there are some considerations and challenges to keep in mind. Conflict of interest may arise if the financial advisor stands to benefit from trust-related transactions or investments, potentially compromising their objectivity. A way to ensure they are acting in your best interest is to ensure that they are a fiduciary. Additionally, grantors should carefully evaluate the fees associated with appointing a financial advisor as a trustee and ensure they are reasonable and transparent.


Conclusion:

Financial advisors can be effective trustees by leveraging their knowledge in financial matters, aligning with the grantor’s financial goals, and maintaining objectivity and impartiality in decision-making. Financial advisors can help optimize the trust’s performance by integrating financial planning strategies into trust administration to help achieve the grantor’s objectives. However, grantors should carefully evaluate the potential conflicts of interest and fees associated with appointing a financial advisor as a trustee before deciding.

Please note: The financial professionals of Steffens & Steffens and other associated persons of Commonwealth Financial Network® are prohibited from serving as trustee, executor, or any other control role for clients.

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