Posted by Back in 2012, I was assigned as the fiduciary for a family trust. A trust is used for estate planning to preserve assets and minimize taxes and probate costs associated with transferring assets through a will. A fiduciary is responsible for managing the investments and distribution of the Trust. The assets of the trust are held at a local bank that provides investment management services. Every year around tax season, they ask me to review the investment strategy. Since the beginning, funds have been invested in what they call a balanced investment strategy. This is roughly 50% stock and 50% fixed income. In February 2022, as market conditions began to deteriorate, I requested that they change the mix to 40% stock and 60% fixed income. Which was a fairly minor change in my opinion. They refused to make the change. Instead, they sent an email with examples of how past economic downturns played out and why staying the course would be a better option.
The trust officer who is assigned to the account is young and inexperienced and has probably never lived through a financial downturn. The bank takes a monthly percentage from each account and has a vested interest in keeping accounts invested in the market. They make dozens of small trades each month based on automated information they receive from external investment reports. I had no input in choosing the bank and I’m sure our account is one of the smallest they manage. I decided not to pursue the strategy change request and instead focused on making adjustments to my personal accounts. The family trust will have to ride out the downturn on its own. Banks who manage trust accounts are now making much less in management fees.
In a recent email the trust officer stated that many clients don’t even want to look at statements or discuss this subject. They go on to say that we are in the midst of a substantial and difficult change in our economic landscape. No kidding? That’s why I wanted to change the investment strategy back in February. They now acknowledge that the following changes are needed: Reduce/minimize international equity holdings while maintaining U.S. equity positions. Move even more of the intermediate-duration bonds into short-duration bonds. Buy more fixed-rate corporate bonds, while funding that purchase from the floating-rate fund. These changes are a little overdue in my opinion. I don’t expect we will see much if any distribution from the trust this year. I only know that as soon the need for the trust ends, the account will be closed.