The Value Of An Independent Corporate Trustee For Institutional Clients

In our asset management work with clients, we continually stress the importance for them of having what we term, “a prudent division of professional duties”.  By this, we mean it’s in a client’s best interest if each of the key professional roles involved in the management of their wealth — ie: investment management, custodian/trustee, administration, etc. — is performed by a completely separate & professionally competent and experienced firm.  As architects of clients’ portfolios, our belief in this principle is grounded in the realities of both transparency and objectivity.  In other words, when each of these professional services are performed by a separate organization, the client has complete transparency with respect to the fees that they pay for that given service and the value that they receive for the fees paid.

When clients decide to work with financial organizations that provide a “fully integrated” solution that covers all of these key wealth management services, they trade-off ease & simplicity for lack of transparency and objectivity.  In other words, if the pricing and services are bundled, it’s difficult for the client to determine whether or not they’re getting fair value for each of the services provided.  Also, if there’s an issue with one of the services that comprise the overall integrated service offering, the client is faced with a difficult decision of transitioning all of their services….not just the services that experienced issues.

This principle of “prudent division of professional duties” is very applicable to the role of a corporate trustee.  As the corporate trustee is the organization that truly “owns” the institutional investment assets of the foundation, endowment or pension plan, the value of their role cannot be underestimated.  In other words, a client wants to absolutely ensure that the corporate trustee has the financial, reputational and professional competencies to carry-out the fiduciary role that they’ve been assigned.

Canadian Western Trust has written a good two-page summary of the features and benefits for pension clients — that is equally applicable to foundations & endowments — of engaging a truly independent and professional, corporate trustee.  To read this article, please click here.