ENHANCING YOUR WEALTH

BY

HELPING YOUR CLIENTS ENHANCE THEIRS

A ROUNDTABLE DISCUSSION August 26, 2014

8:00 – 10:00 a.m.

RICHARD P. TRUMPLER

CHIEF OPERATING OFFICER

KEVIN J. BATTERTON

MANAGING DIRECTOR © New York Private Trust Company 2013

INTRODUCTIONS

• Introduction of Dick and Kevin – 60 years of HNW experience

• Worked with financial advisors since 1996

• Introductions by participants

• Your Firm or Company

• Time in investment advisory business

• Business model – i.e., what do you do and how?

• How do you attract and keep your clients? 2

Richard P. Trumpler Chief Operating Officer Mr. Trumpler possesses more than 39 years of experience within the banking and financial services industry. Prior to joining New York Private Trust Company, he was the CEO of the Banking Services Group at Concord Wealth Management, a third-party manager open architecture wealth management platform. Previously, Mr. Trumpler was Senior Vice President at Citigroup in New York City, where he was the General Manager of the Trust Administration, Investments and Tax Groups at Citigroup Trust. During his tenure at Citigroup, Mr. Trumpler also acted as Director of National Sales for the trust division. Mr. Trumpler assumed a progression of roles at Bank of Boston, including Regional Director of Private Banking for the State of Maine, President and CEO of Old Colony Trust Company in Hilton Head, SC and President of Bank of Boston Florida. He began his career as a systems analyst and programmer for Union Mutual Life Insurance Company in Maine, before entering the brokerage and trust industries. Mr. Trumpler is a graduate of the University of Rochester. Upon graduation, he entered the U.S. Navy flight program and became a naval aviator. In addition to his six years of active duty, Mr. Trumpler remained in the Naval Reserves, where he attained the rank of Captain. rtrumpler@nyptrust.com Phone: (212) 850-4015

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Kevin J. Batterton Managing Director Prior to joining New York Private Trust Company, Mr. Batterton served as Senior Director for BNY Mellon Wealth Management in Greenwich, CT. Mr. Batterton is a Certified Financial Planner™ and has extensive experience advising high net worth individuals, foundations and family offices in areas of trust and estate planning, investment management and private banking. He works closely with his clients’ advisors to create optimum needs-based solutions. Mr. Batterton started his career in commercial banking with Fleet Bank, NA (formerly National Westminster Bank), where he was promoted to Senior Vice President & Team Leader. He transitioned into Private Wealth Management in 2000 upon joining The Private Bank at The Bank of New York in Manhattan. Active in his local community, Mr. Batterton currently serves as Board Member of the United Way of Greenwich and Secretary for its Executive Committee. He has also been involved with the Fairfield County Community Foundation Professional Advisors Council and the Affordable Housing Committee in Ridgefield, CT. kbatterton@nyptrust.com Phone: (212) 850-4055

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Possible Investment Advisory Business Models

• Wirehouse financial advisor (e.g., Morgan Stanley) – multiple models for FAs (SMA, options, planning based, transactional, Mutual Funds/ETFs)

• Non-wirehouse financial advisor (e.g., Bernstein)

• Registered Investment Advisor boutique

• In house proprietary management

• Open architecture

• SMA/UMA

• ETFs/Mutual Funds

• Hedge Fund

• Insurance and/or HNW planning-based

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Whatever Your Business Model… Common Denominators

• Many phone calls, some referrals, a very few good clients – i.e., hard work

• Very high touch; relationship is critical

• Need to have low client turnover (except those clients you want to fire!)

• Need to maximize referral business

• Your business can be multi-generational – you need your clients to be multi-generational as well – don’t lose to a bank trustee upon your client’s death

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What Resources Do You Have to Expand Your Business? • Advertising

• Public relations firm

• Client events

• Networking organizations

• Planning focus

• Tax

• Estate planning

• Retirement planning

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How can you differentiate yourself? • Create a “brand”

• Unique presentations (ala Bernstein)

• Consistent, superior performance

• Superb relationship management

• Know the entire family

• Become a trusted advisor

• (Read Family Wealth by Jay Hughes)

• Create trust through objective planning capability

• Create trusts through estate planning

• Align yourself with a trust company that does NOT compete with you, but will delegate investment function to you

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How Do Trust Services Enhance Your

Client Relationships?

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Build A Bigger Fence Around Your Client

• One Stop Shopping / Trusted Advisor

• Keep Clients from talking to other financial services providers / competitors

• Retain Assets

• Sticky

• Successor Trustee Appointments

• Build Multigenerational Relationship

• Get to know client’s family / beneficiaries

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Grow Business – Attract Assets That Are In Trust At Other Institutions

• Review document; exercise beneficiary rights to remove

• Beneficiaries ask Trustee to resign

• Get a lawyer to write a letter requesting resignation

• Get court approval

• Decant

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What An Advisor Friendly Trust Company

Can Do For You

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• Help you compete for trust business at traditional bank trust departments

• Enable you to manage the trust assets as a directed or delegated advisor

• Directed Trust

• Delegated Advisor

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Directed Trusts

• Facilitates the appointment of specialists who can operate independently of each other

• Also allows the involvement of family members in important trust

administration decisions, such as the availability of discretionary distributions • Provides the grantor a great degree of control and flexibility in the structure of

the trust • Creates more fee transparency

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Types of Directed Trust Advisors

• Investment Advisors

• Distribution Advisors

• Trust Protectors

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Delegated Trusts

• Corporate Trustee retains responsibility for investments, but delegates management to another individual/entity

• Trust Document must allow for delegation

• Due diligence

• ADVI, ADVII, FINRA, etc.

• Experience managing trusts, approach, philosophy, etc.

• Investment Policy Statement • Stated investment objectives

• Asset allocation strategy

• Delegated Management Agreement

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How To Work With An Advisor Friendly Trust Company

• Custody

• Communication

• You own the client

• Trust Administration

• Account opening

• Transfer of assets

• Distributions of income and principal

• Tax preparation

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Why your clients need trusts

• Probate

• Taxes (Income and Death taxes)

• Federal Estate Tax

• State—death and inheritance taxes

• Control over use and distribution of assets

• Management of assets for beneficiaries

• Meeting philanthropic goals

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Reasons for Planning and the Use of Trusts

• Avoid Intestacy • If you have no plan, your state has a plan for you

• Not a plan anyone would ever have created

• Planning enables one to distribute assets as desired

• Avoid Probate • Time consuming and expensive; why deal with courts and

governments if avoidance is easy

• Possibilities • Joint tenancy with right of survivorship

• Many disadvantages

• Payable on death (POD) accounts

• Beneficiary designations (insurance/IRAs, etc.)

• Assets in a living trust (typically revocable)

Reasons for Planning and the Use of Trusts

• Most states have a death or inheritance tax

• Taxes typically have a low exemption

• Tax rates often start at 16%

• A decedent’s $2 million estate in New York would pay $99,600

• Proper planning, including lifetime gifts, can save thousands of dollars

• Trusts can provide for asset protection at multiple levels

• Protection from creditors and predators for beneficiaries

• Asset protection for grantor of the trust

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Reasons for Planning Incorporating Trusts

• Provide for management of assets for minors, special needs trusts (SNTs) and beneficiaries who do not have investment skills

• Small business and retirement planning • Estate freezing techniques

• Minimizing income taxes on IRAs and 401(k) plans

• Planning for disability • Increased probability of mental or physical disability as

lifespans increase

• Revocable living trust vs. a durable power of attorney

• Revocable living trust vs. guardianship 21

Reasons for Planning Incorporating Trusts

• Control use and distribution of estate assets

• Avoid joint ownership as a solution

• Second marriages; children of prior marriage

• Special needs beneficiaries

• Keep estate assets in family, not to in-laws

• Philanthropic goals

• Use of charitable remainder trusts, private family foundations and charitable lead trusts

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Checklist of Reasons to Set Up Trusts

CLIENT ESTATE PLANNING CHECKLIST FOR TRUSTS (Even for estates under $10 million)

Every checked box is a reason why your client may benefit from establishing a trust. Most financial advisors conduct periodic reviews with their clients, such as quarterly, semi-annually or annually, and this checklist can be used to identify sensible planning opportunities using a trust.

Does client have:

• Children from a prior marriage? • Children who are married? • Children with a spouse your client doesn’t like or trust? • Children with disabilities or impaired judgment? • Beneficiaries who are unable or not responsible to manage substantial assets? • Children who are in high-risk (litigious) professions? • Children who are entrepreneurial and therefore subject to business reversals • Closely held business?

Other: • Is your client in a high risk profession? • Is your client a resident in a state with an estate or inheritance tax? • Does your client have low cost basis stocks? • Does your client have assets in more than one state? • Does your client have substantial IRAs or 401(k) plans? • Is your client elderly, with a family history of dementia? • Is your client concerned about privacy in the administration of his/her affairs? • Is your client contemplating the sale of a business? • Does your client have philanthropic goals?

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12 Reasons to Not Use an Individual as Your Trustee

• Inability to remain unbiased and neutral; difficult to be the “financial gatekeeper” for a parent, sibling, child or grandchild

• Unable to balance conflicting needs of various classes of beneficiaries; income beneficiaries vs. remaindermen

• Usually do not have time to properly administer a trust

• Seldom have the wide range of necessary experience

• Trust law—varies from state to state and is constantly changing

• Trust accounting—need to account for income and principal

• Use of techniques, such as Power to Adjust

• Real estate—resident and commercial

• Business management—especially family-owned businesses

• Broad range of investments, including hedge funds, private equity

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12 Reasons to Not Use an Individual as Your Trustee

• Do not understand the trust document and nuances of trust language used by drafting attorneys

• Do not understand personal liability and likelihood of being sued—80% of fiduciary litigation is against individual trustees

• Do not have process (policies and procedures) for making decisions

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12 Reasons to Not Use an Individual as Your Trustee

• Seldom keep sufficient records to document decisions that will justify and protect them

• Not subject to any regulatory or audit oversight; accountable to no one

• Individual trustees die! Always! Need to provide for continuity of trust administration in a dynasty trust world

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12 Reasons to Not Use an Individual as Your Trustee

• Do not have tools necessary for accounting and reporting

• Do not have resources (“deep pockets”) to provide redress to beneficiaries in case of errors or mismanagement

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The benefits of naming a corporate trustee

• Avoid Family Conflicts, Sibling Rivalry

• Impartiality

• Special Needs

• Continuity of Entity

• Access to Favorable Trust Situs

• Professional Knowledge of Trust Laws and Administration

• Alternatives to Full Trustee

• Co-Trustee

• Agent for Trustee

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Why Delaware ?

• DE has no rule against perpetuities (Dynasty Trusts)

• DE irrevocable trusts are exempt from DE income tax on accumulated earnings and capital gains if there are no remainder beneficiaries who are DE residents

• Directed Trust Statute allows for use of third-party investment advisors

• Creditor protection (Asset Protection Trusts)

• Confidentiality, no trust court filings

• Delaware's Court of Chancery

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New York Private Trust Company

• Delaware State Chartered Trust Company headquartered in

Wilmington, DE • Affiliated with Emigrant Bank in New York

• Owned by Howard Milstein, one of largest privately held banks in the country

• All administration conducted in Delaware, regardless of situs • Key Statistics

• 10 employees • $1.5 billion assets under administration • 450 accounts

• Focus • Exceptional Service

• Responsive • Flexible • User Friendly 30

NEW YORK PRIVATE TRUST COMPANY

ANCILLARY CAPABILITIES

P & C Insurance

Open Architecture

Boutique Private Banking

Fine Art Lending Co-Investment Opportunities

Private Label Trust Services

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