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Trustee savings client bank

Whenever you see an article on trusts, it almost always repeats the same arguments about the benefits, they help avoid inheritance tax, avoid probate, make sure the right people benefit and so on – and it is true that all of these are benefits for the client.

But there are other potential benefits for advisers that are becoming more pertinent in the present economic climate.

As the credit crunch continues to bite and the protection gap continues to widen, we all need to find ways to increase protection sales. Few people think of trusts as a way to expand their client base but they can be.

I have for a long time been an advocate of advisers not only taking the time to explain the benefits of the trust to the client but also explaining to those people they choose to act as trustees exactly what their role entails. It is not just a case of sign the form and forget it.

This creates opportunities to talk to a fresh set of people. These conversations can lead to the trustees asking questions about their own situation. They may have existing protection policies they have either bought directly or through an adviser that are not written in trust or they may have no protection at all.

Both of these provide an opportunity for advisers to carry out a review of the trustees’ own needs, potentially leading to new clients and an increase in business. If more than one trustee is appointed, the opportunity increases.

It does not have to be an onerous task. One approach is to ask clients for the names of maybe four people they would be happy to ask to be a trustee, letting the client know it is important that these people understand what their role is before agreeing to act.

It is important the adviser speaks with them before completing the form, as, once appointed, these people have significant powers over how the proceeds of their new protection plan are dealt with.

The adviser can then ask their client to speak to them and warn the trustees to expect a phone call or letter to arrange a short meeting to explain their role and obtain their signatures on the trust form. The adviser now has warm leads to schedule an appointment.

Many providers produce literature that can help explain to trustees what their role entails and which can be left with them for future reference. These can set out their duties and the powers they have, as well as answering the most frequently asked questions about being a trustee.

As well as attracting new clients, now may be the time to make a concerted effort to establish contact with existing clients whose plans have not been written in trust previously, particularly as the needs and priorities of many of them may have changed as a result of the economic climate.

How they are approached will make all the difference. I would not advocate simply writing to them to tell them you think their plan should be under trust to avoid inheritance tax.

Most people still think these are things for only the super- rich to worry about, so you probably will not get much response. But a suggestion that it would be wise in the present climate to make sure they are getting the best value out of what they are spending may get a better response.

This presents opportunities to discuss a wide range of issues, including writing existing or any new protection plans in trust to make sure that the whole amount of cover goes to the people they intend. The premiums they have paid have more than likely already suffered tax as part of their income. Do they really want to effectively be spending up to £4 out of every £10 they are paying to give more money to the taxman? Or would they prefer to make sure their family receives full value from the money they have spent on protecting their future?

There is also the question of advisers leaving themselves open to a complaint or even being sued by a client or their disgruntled family if you do not mention trusts.

The case of Hurlingham Estates v Wilde & Partners in 1997 illustrated that the courts will not only look unfavourably on things that the adviser has done wrong but may also hold them liable for things they did not do without warning the client that this was not part of the advice they were giving if they suffer as a result.

Being able to advise confidently on the appropriate use of trusts can prevent advisers from finding themselves in a similar situation.

If advisers do not feel comfortable about advising on trusts it may be worthwhile striking up a professional relationship with a firm of solicitors to refer clients to.

Choosing the firm carefully, perhaps one that does not have specialist financial planners within the firm could lead to a reciprocal arrangement, again expanding your client base.

Trusts are not just another form to fill in. They can play an important role in ensuring that your business remains successful.


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