Over ten years on from the Trustee Act 2000, the extent of the duties it has imposed on trustees is now clear. Recent cases reiterate the fundamental message that trustees need to clearly differentiate their role as trustee from that of an investment adviser and ensure that they do not cross those boundaries. The Act imposes the requirement for “proper investment advice” to be sought, and the Solicitors Regulation Authority (SRA) in 2009 confirmed that this means wholly independent financial advice.
Specifically, the Act requires trustees to consider the following standard investment criteria:
-
the investment requirements of trustees and beneficiaries
-
the underlying taxation of the investment
-
the position and risk profile of the trustees and beneficiaries
-
the amount available for investment
-
the impact of any administration costs
-
the need for diversification, as appropriate to the circumstances of the trust. Diversification is an important risk-management concept in the investment of money
-
the need for “proper advice”, i.e. independent financial advice. This means that the financial adviser can act on behalf of the trustees in selecting the most appropriate investment vehicle rather than a specific product provider. The trustees should ensure that the financial adviser is appropriately qualified. In practice, this means they should hold the Diploma in Financial Planning with the Chartered Insurance Institute or Personal Finance Society (Dip PFS) and ideally a qualification with the Society of Trust and Estate Practitioners (STEP).
Trustees should feel empowered to review existing investment portfolios. The role of an independent financial adviser in providing ongoing investment advice for professional and non-professional trustees has become more clearly defined as a key part of good trust governance.
KMG can help you meet your obligations under the Trustee Act by offering a compliant and consultative advisory service for trustees, which fulfils the requirements of the legal framework. As truly independent financial advisers we can access products from across the whole market. We offer STEP qualified advice and specialist in-house investment advice.
|
