Directed Trusts: An Emerging Trend That Positions You as a Powerful Client Resource

One of the most common misconceptions about trusts is that only the truly wealthy benefit from them.

However, Cerulli studies show that U. S. wealth transfers will total $84.4 trillion over the next 20 years. Of this, just $35.8 trillion (42%) is expected to come from high-net-worth and ultra-high-net-worth households.¹ But the majority — 58% — lies with the mass affluent.¹

This means there is a significant opportunity for you as the financial advisor, whether you want to help high-net worth or mass affluent clients. As customer demand for efficient wealth transfer strategies grows, the need for knowledgeable financial advisors grows with it. Knowledge of trust strategies can help you differentiate yourself from the competition and connect with the next generation of clients.

In addition, by working with an advisor-friendly corporate trustee like LPL’s trust affiliate, The Private Trust Company (PTC), you can help clients manage the assets held within the trust — something that wouldn’t be possible if the assets moved to most corporate trustees who also serve as the financial advisor.

A new opportunity: Directed trusts

A trend is emerging that positions you to serve as a powerful client resource. Directed trusts enable clients to hold concentrated asset positions and/or non-income-producing assets within a trust while still utilizing a corporate trustee like PTC.

Increasing demand for the flexibility offered by directed trusts has pushed many states to adopt Uniform Directed Trust Acts (the UDTA). In fact, California just passed a UDTA effective January 1, 2024, joining Arkansas, Colorado, Connecticut, Florida, Georgia, Indiana, Kansas, Maine, Michigan, Montana, Nebraska, New Mexico, Utah, Virginia, Washington, and West Virginia in UDTA adoption.

The UDTAs allow a trust grantor to give a non-trustee the power to direct the trustee on specified administrative activities traditionally performed by the trustee. This includes the power to direct distributions, trust investments, or other discretionary administrative actions. As a result, clients and their financial advisors can work with a corporate trustee like PTC while maintaining substantial flexibility regarding the investments held by their trusts and a high level of control over the trustee.

Deepen client relationships through directed trusts

A great way to start is by asking clients about their wealth transfer plans and whether they have any concerns about how their assets will be distributed. You might find clients like the benefits of trusts but are concerned about losing control over their assets — which is where directed trusts can come into play. You could simply suggest the idea and act as a source of knowledge for clients, or you could even help clients implement directed trusts (or standard trusts) with the help of PTC.

PTC has extensive experience utilizing the court-tested directed trust statutes of multiple states to allow greater flexibility regarding investments in a trust.

To learn more or get started, visit the PTC website,  contact the team at (858) 779-5053, or email Trust Services.