How much will an institutional trustee cost? I usually get this question when talking with a client about whether to choose an institutional trustee (as opposed to naming a family member or trusted friend as trustee). And while I usually stress that price isn’t the only factor, it is perhaps the biggest in the client’s mind.
A recent study by the Trust Advisor Blog looked at both directed trust and investment management services for the third quarter of 2010. The study compared fees charged by a handful of the larger trust companies, including Advisory Trust, Bryn Mawr Trust, and Edward Jones, to name a few.
The fees for Investment Management Services ranged from 0.90% to 1.33% for the first $1 million and 0.55% to 1.0% for the next $1 million. In the Directed Trust Services category, fees range from 0.40% to 1.33% for the first $1 million and 0.30% to 1.00% for the next $1 million. Minimum annual fees ranged from $1,000 to $20,000 and tended to track the required minimum balances.
Not surprisingly, the study found that pricing is not the only factor differentiating trust companies. Other relevant factors include:
- Critical Mass (Assets Under Administration)
- Technology
- Overlay Systems
- High Touch Services
- Price
According to the study, since smaller, independent trust companies with fewer assets under management are increasing market share, assets under administration is not as big of a factor as it once was. And directed trusts—in which the trust company and the advisors share the management and fees of the trust—are becoming increasingly popular way to strengthen the bond between the advisor and the trust company.
Edward Jones Trust Company was a newcomer to the study. Since Edwards Jones has about 11,000 of its own representatives, the trust management function is usually closely tied to the advisory role. The article notes that the close advisor-trustee connection usually causes the trust business of brokerage-affiliated trust firms like Edward Jones to stay with the brokers/representatives.
Note: If your trust company would like to be included in the next study, you can take the “Trust Fee Survey” here.
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