By Jill Nagy
For people with more money than time to manage it, the trust department of a bank — sometimes called private banking — may be the answer. They offer professional management of assets, make investment decisions, and distribute income, guided by the terms of a trust instrument.
Trusts serve many purposes such as managing the assets of children or disabled people, providing support for charities, or as an estate-planning or tax-planning tool. They may be managed by individuals with few, if any, formal qualifications; by professionals such as financial planners, brokers, attorneys or accountants; or by the trust department of a bank. Trusts are, like corporations, entities separate from the humans who place their assets in them.
In the case of one bank serving the Saratoga area, KeyBank, a separately chartered private banking and trust department is available to individuals, families or small businesses looking to place $1 million or more of assets into a trust.
Termed “a local delivery channel within the bank,” by Scott Moulton, a senior vice president based in Saratoga Springs, the private banking department provides a team-centered approach. Typically, a team consists of five people: a relationship manager, a trust officer, a portfolio manager, a financial planner, and an investment solutions specialist.
Generally, “the estate planning piece is the umbrella over all of it,” added Mark Lasch, also a senior vice president and a senior trust officer at KeyBank, based in Albany. “An efficient and orderly disposition is an important part of the end game,” he said.
Key also provides trust client services for the “emerging affluent,” i.e., those with less that $1 million, Moulton added. These are “customized to the client’s needs,” he explained, but may not include the full five-member team approach.
A “relatively new arrow in our quiver,” according to Lasch, is the “Delaware trust,” a trust governed by the laws of the business-friendly state of Delaware. Delaware “is on the cutting edge of the fiduciary world,” he said. On that edge, there is no longer a rule against perpetuities; a trust can last forever, like a corporation.
Lasch refers to that as an opportunity for “dynastic planning.” Key’s private bank is chartered in Delaware and maintains an office in that state.
There is also broad discretion in choosing the types of assets in which to invest the trust assets. “The universe is kind of wide open,” Lasch said, limited, however, by the “prudent investor” standard that a bank fiduciary is expected to live up to.
Lasch cited the “prudent investor” standard as one of the important reasons to choose a bank to manage a trust. “I think banks are recognized as being held to a higher standard than a brokerage firm,” he said. The latter is guided by the somewhat lower “suitability rule.”
KeyBank no longer sells any investment instruments of its own, aside from the traditional banking products such as savings accounts and certificates of deposit. Previously, KeyBank had proprietary mutual funds, the Victory Family of funds, but they recently sold that company and no longer sell any of their own products.
The number of people using KeyBank’s trust and private banking services is proprietary information, according to Theresa Myers, senior vice president for public relations. Myers, however, pointed out the information that KeyBank has some family trusts the bank has been managing for more than 100 years.
All that expertise comes at a price, of course. The services of a private banker are “a little bit pricey,” Moulton admitted.