BULLS & BEARS: Today's trust company isn't your grandfather's

June 11, 2007

Over the last few months, I've gotten to know an expert in the trust business by the name of Charlie Mosbrucker. He is a former trust officer and lawyer who spent more than 22 years working in various trust departments.

Over the last decade or so, the trust business has evolved and, as he says, "Today's trust company is not your grandfather's trust company." When I think of a trust company, my image is that of a chubby white-haired guy stuffed into a pinstriped three-piece suit who, in a stodgy and unimaginative fashion, oversees accounts for wealthy folks.

Well, if you are one of those wealthy folk, and stodgy is a description of your trust, you can change it.

As Charlie said, "Whether the trust is new or old, it doesn't have to be that way."

Trust assets don't have to be cobweb-covered or socked away in the bank's in-house funds.

If you are not happy with the investment performance from your trust company, shake it up.

You can have trust assets managed by a progressively minded money manager and in many cases still keep the same trustee to handle the rest of the trust functions.

This separation of authority is called "bifurcation of duties."

Bifurcation of duties is certainly possible with newly drafted trusts, but also can be achieved with existing trusts.

Not all trust companies welcome the opportunity to have funds managed by outside managers.

But if your stodgy, old trust company says you can't hire an outside manager, you usually can change to a trust company that will let you.

More and more corporate trustees are maintaining a business model of acting as an "adviser-friendly" trustee by letting trust assets be managed by a money manager of your choice (within reason).

Shaking things up and changing a trust around, however, is like turning an oil tanker. It can be done, but you'd better be patient.

It takes time and some legal expense and usually most, if not all, the trust beneficiaries have to agree to the change.

Sometimes, when the current trustee learns his investment advisory services are no longer needed, he will willingly resign. Other times, you had better be prepared for a tough fight. Unless you are a real painin-the-neck client, your old trust company might not want to lose your fees and will go down swinging.

Besides preparing for a bit of a brawl, I would suggest you hire a professional for your corner man. Hire someone who specializes in trustee searches and has seen a lot of trust company punches thrown.

I've seen a trustee replacement bout from the front row and can tell you that you don't want to try the trust company rope-a-dope alone.



Gilreath is co-owner of Indianapolis-based Sheaff Brock Investment Advisors, money management firm. Views expressed are his own. He can be reached at 705-5700 or daveg@sheaffbrock.com.
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