Trustee Act 2000
Having previously been guided by a weighty body of case law, trustees have had their duties codified by the Trustee Act 2000.
The legislation applies even to trusts predating the Act, so that trustees who are fairly inactive, and tended to invest restrictively because of the old ‘narrow’ or ‘wide’ powers of investment imposed by older legislation (see Trustees Act 1925 and Trustee Investments Act 1961 and their Scottish and NI equivalents) or because the trust wording, find unexpected new responsibilities thrust upon them.
Now the new Act seems to recognise the problems posed by ‘caution at all costs’ because it obliges trustees to apply standard investment criteria, diversify investments, and review them. Investments need to meet the criteria of SAD (suitable, appropriate and diversified); it also acknowledges the challenges faced by non-professional trustees in investing trust property by imposing a duty to seek professional advice.
The Act says that trustees must obtain advice unless it is unnecessary or inappropriate to do so. This could be taken to mean that, should a trustee not take advice, he implies he is suitably qualified to invest the trust property, with all the responsibility thus conferred.
Prudent trustees will seek advice. Taking advice, however, does not absolve trustees from their responsibility to act in the best interests of beneficiaries, and it is important that the correct investment adviser is chosen. Simply put, trustees must have a robust process in place to select investment advisers given the volatile markets that we are faced with now and in the future, this has become even more important.
At Concept Financial Planning for the avoidance of conflicts of interest, fee-based arrangements, with no commission, are preferred. Without commission, there is no incentive for a planner to recommend, unscrupulously or unconsciously, one product over another (or refrain from recommending any product) simply on the grounds of commission.
Wise trustees can protect their interests as fiduciaries when seeking investment advice, by selecting advisers that understand this responsibility and themselves behave like fiduciaries.
We believe part of any financial planner’s service must include a review process. This is a duty of the trustees under the Act with good reason – regular reviews are in the best interests of the trust and its beneficiaries. Any planner acting as a fiduciary must deliver this part of their service properly. At Concept Financial Planning we have developed the RAA scheme (Review Advice and Administration) to assist trustees to deliver robust planning model in that they can be confident in our professional advice.
The typical services we provide to solicitor firms are:
- Review of the trust
- Review investment for trust objectives – income/growth or targeted returns/amounts
- Bespoke asset allocation models and benchmarking
- Face to face meetings with trustees and recorded minute taking so clear record on all activity/actions needed
