Services meant to help advisors keep assets that might otherwise slip away. Schwab Institutional has launched a new suite of trust services for independent RIAs, designed to help them retain management of trust assets.

According to one estimate, independent RIAs will have as much as 80% of their assets in trusts within a decade as baby boomers begin transferring wealth to the next generation. As a result, advisors are starting to view trusts as an opening to eventually managing all of their affluent clients' wealth.

"The stakes are high for advisors," says Schwab Institutional v.p. Cathy Clauson. "There was more than $3.3 trillion in trust accounts as of 2005, and that number is expected to more than double by 2010," as a significant portion "of the great wealth transfer that is expected in the next 20 years" is predicted to go into trusts.

It's complicated

In beta-testing since March 2007, Schwab's Personal Trust Reporting Services is a trust-accounting and trading platform intended to help advisors work with clients who serve as trustees of irrevocable trusts. It provides for principal and income reporting, trust accounting, periodic trust reports, tax lot accounting, recordkeeping, and tax "worksheeting."

Costa Mesa, Calif.-based Leisure Capital Management is one of the firms that has been testing Schwab's new trust-service platform. "Trustees have been relying on simplistic brokerage statements that fail to report cost basis and income distributions correctly," says its president, Marr Leisure. "The needs of the income beneficiary and remaindermen are different, and Schwab's service ensures that expenses and fees are properly allocated, adding a level of sophistication that reduces potential conflicts and enables advisors to better serve the next generation." (Technicalities aside, a "remainderman" is someone who stands -- sooner or later -- to benefit from a property held in trust.)

Given the intricacies of trust administration Clauson says that "advisors need an efficient, scalable trust solution that helps them deliver the high level of service their clients expect" without turning themselves inside out -- from a practice-management perspective -- in the process. "By providing individual trustees with complex accounting, recordkeeping and reporting for trust accounts, we are helping advisors win and retain assets even as they are transferred from generation to generation."

Schwab Institutional, a division of San Francisco-based Schwab, custodied $581 billion in client assets for about 5,500 RIAs at the end of September 2007. Schwab says that more than 3,000 "independent financial advisors and investment managers" use Schwab Performance Technologies products. -FWR

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