– Dick Arnold, President, San Pasqual Trust

A "private trustee" is usually an individual – a client's trusted advisor – who takes care of the client's family when he or she no longer can. You see lawyers, accountants, business managers and financial advisors filling this role. The client can enjoy the comfort and security of having a trustee who knows the client's family, knows the client's financial affairs, and can be trusted to do the right thing.

Despite the benefits of using an individual as a trustee, there can be concerns:

• What if the individual trusted advisor no longer is able to serve as trustee? Who should be successor? Will the successor know who, and what, the initial trustee knew?
• What if the private trustee doesn't have the mix of expertise called for in the job description? What if no individual is available in the first place?
• What if a trust beneficiary attempts to overturn the trust or attacks the trustee? Does the private trustee have the resources to do complete annual accountings in order to limit the time exposure for prior acts? Does he or she have the processes to document investment decisions and exercises of discretion, so that the trust can resist attack? Is the trustee insured and bonded, so that the trust is protected against trustee errors and can recoup the cost of resolving beneficiary litigation?

Historically, these concerns led to utilizing an institution as trustee. However, that approach can create its own set of issues:

• The number of accounts per trust officer can be substantial. In addition, the trust officer may not even be local. This can get in the way of close, personal, professional service.
• This high account loading can result in rapid, and repeated, personnel turnover, leading to gaps in the continuity of knowledge of the client's family situation.
• The institution will insist, or at least urge, that it manage the trust assets itself rather than continuing with the client's independent investment advisor. This can result in suboptimal investment performance and accountability. Spectrum Group reports that today, one-third of affluent investors use full-service brokers as their primary advisor, and another one-third use investment advisors and financial planners as their primary advisor. Thus, in most cases moving the assets to a bank may not be what the client wants.

One solution to these problems is to create a licensed, regulated institution, with capital, insurance, processes and professional personnel, which by design does not manage trust assets but instead oversees the investment managers, and by design is staffed to provide a very high level of service with low personnel turnover. This provides the best of both worlds: a "private institutional trustee" who is only a trustee. The client's family can enjoy the benefits of this new approach along with the investment performance that results from independent management. That's the San Pasqual Trust approach. We believe that this new design will benefit both our clients and their advisors.

© 2007 Richard S. Arnold   [vCard] [1]