A corporate trustee can be a good solution for many wealthy grantors, but for the ultra-high-net-worth individual, they will often fall short for a variety of reasons. Different from the adage that compares corporate trustees to luxury cars – “great if you can afford them, but overkill for many” – many ultra-high-net-worth individuals have a different problem, corporate trustees do not offer the flexibility, personalized touch and diverse expertise to which they are accustomed.
There has been an explosion in the formation of single-family offices for the ultra-high-net-worth family. In the place of the corporate trustee, many of these families have opted to utilize a personalized committee that works in conjunction with a non-custodial corporate trustee. Families with over $100M in net worth are in a unique position that allows them to fund such an operation, helping them realize their distinctive vision.
This is not to say there isn’t a role for the traditional corporate trustee. In fact, as someone who used to work at a corporate trustee, I understand it is the right decision for some. Nevertheless, let’s discuss two significant reasons why the corporate trustee may not work for ultra-wealthy and explore an alternative solution.
With substantial wealth comes the need for dynamic decision-making, especially regarding investments, tax strategies, or charitable giving. Corporate trustees are often hampered by layers of bureaucracy, which are deliberately designed to slow decision-making and protect the corporate bottom line. Bound by its institutional structures, corporate trustees can appear to stand in the way of families trying to accomplish big goals. The corporate trustee always seems to have plenty of decision-makers who want to change the family’s vision.
While some grantors may appreciate restrictions imposed on their families’ visions, many more would prefer to see their family pursue their dreams free of bureaucratic input. In this way, the corporate trustee may act as a hinderance to the grantor’s long-term vision rather than a solution. The slow bureaucratic response and “one-size-fits-all” approach to finding solutions for the family will always fall short for families with strong cultures and big dreams.
Additionally, many corporate trustees have transformed over the decades to become large financial institutions beholden to shareholders. This reality sets up a clear conflict of interest between the family and corporate trustee, especially when the family wishes to move trust assets. The corporate trustee often earns significant revenue from the financial management of those assets–often more than their fiduciary fee. As such, corporate trustees prioritize their proprietary investment products or bundled services. While this may serve some families, it often serves primarily to benefit the corporate trustee.
Nevertheless, there are solutions for the ultra-high-net-worth family looking to avoid the corporate trustee. Personalized committees allow families to appoint trusted advisors with a variety of expertise, such as tax specialists, legal advisors, investment managers, or business consultants. These advisors work collaboratively to craft solutions that address the unique challenges of the estate.
Unlike corporate trustees, a personalized committee operates under the family’s direction, allowing for quicker, more flexible decision-making. Committees can be designed to reflect the family’s evolving priorities, offering a level of adaptability that corporate trustees typically cannot provide. By involving family members and long-standing advisors in the decision-making process, personalized committees ensure that estate management aligns with the family’s legacy, values, and goals. This personal touch can also foster unity and help prevent family disputes due to misunderstandings.
While corporate trustees have their place, they are not always the best fit for the ultra-wealthy. When a team of trusted advisors works with and for the family–and not for the corporate bottom line–families can rest assured that their wealth will ensure and serve as a tool to bring their dreams to reality.
