FOR BANKING AND FINANCIAL SERVICES

It can make good commercial sense to transfer trust administration portfolios to a specialist provider for several reasons.

• Asset consolidation: There is a growing trend towards clients consolidating their assets under a single trust structure. This makes sense, as there are precious few cases where multiple trusts are appropriate for private wealth structuring and reducing the number of trusts also reduces costs. While there are clear benefits for the client, this creates complications for banks where the client wishes to incorporate structuring for unfamiliar asset types (most of them non-bankable) or include external bank accounts, resulting in a conflict of interest.
• Changing risk appetites: As large financial institutions develop, they naturally change their attitude towards risk across a number of areas, which can include the jurisdictions the structures or clients are based in, the types of assets being held, the types of individuals who hold them, and complex mixtures of all the above.
• Compliance cost pressures: The trustee sector has been undergoing consolidation for a decade due to growing complexities and compliance costs. Non-core operations are increasingly under pressure from larger, institutional businesses able to invest heavily in the deep governance and compliance expertise required to make it sustainable. In these circumstances, it is common to either exit entirely or set a minimum trust annuity value and exit anything below that threshold.
• Before or after a sale: Either in preparation for the sale of a division or after purchasing one from a rival, there can be a mismatch between the business appetites of the vendor and buyer. Where the focus of a transaction is on core business lines, it can be prudent to exit ancillary business lines such as trustee services separately.

Positive client relations are essential when transferring trust services to a partner. Choosing appropriate partners and ensuring a smooth handover requires reflection, sensitivity and expertise. Some aspects to consider include:

• Non-competitive: It is essential that the organisation is purely an administrative specialist, with no competing interests in investment management or other key business lines.
• Soft-landing: A proven track-record of onboarding high volumes of institutional clients in the past ensures that common problems in the client experience can be avoided.
• Jurisdiction and asset agnostic: Most trust portfolios will include a wide geographic spread and significant opportunities for consolidation, particularly where clients have non-bankable assets to consider. It’s important to select a provider with the international reach to provide a personalised client experience and comfort with a wide range of asset classes.

Depending on your reasons for exiting or transferring trust administration services to a partner, there are several different routes you can take, offering different commercial advantages and disadvantages.

• Managed Trust Company (MTC): An MTC is a regulatory arrangement, available in certain reputable licensing jurisdictions, which allows you to maintain your own trust company but have the regulated services provided by a partner such as Suntera Global. This effectively provides a white-label arrangement in which you can continue to manage clients under your brand and take a mark-up on associated fees but forego the regulatory and cost burdens of maintaining the portfolio in-house.
• Sale: We have on several occasions purchased trust portfolios from financial institutions, allowing them to monetise their exit from the service line while providing a relatively seamless transition for clients.
• Preferred supplier: A more arms-length approach, appropriate in circumstances where there may be conflicts of interest in a more commercial arrangement, is to vet a partner such as Suntera as a preferred supplier, to which you then introduce clients.

Our experienced team have dealt with all the scenarios outlined above and are able to provide a client-centric transition for institutional trust portfolios.