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The Entrepreneurship Issue

Should a trustee be asked to fulfill an investment manager role as well?

The Shafer Barber Winkler Group atMorgan Stanley Smith BarneyMatthew T. Shafer, CIMA®, Senior Vice President, Financial Advisor Mark M. Barber, Vice President, Financial Advisor Jeffrey J. Winkler, Vice President, Financial Advisor

South Florida Leading Wealth Advisor

The Shafer Barber Winkler Group 595 South Federal Highway, Suite 400, Boca Raton, FL 33432 561.393.2066 at Morgan Stanley Smith Barney 130 Kercheval Avenue, Grosse Pointe Farms, MI 48236 313.343.8449 28 State Street, 26th Floor, Boston, MA 02109 617.570.9527

Trusts are an important component of effective planning for wealthy families. While most clients (and their advisors) put a lot of thought and effort into the formation of trusts, they often make quick decisions about naming the successor trustees when the client passes away or becomes incapacitated. There are many factors to consider when choosing a trustee. A trustee is responsible for a number of tasks, some simple and some complex. Either way, these tasks must be performed taking into account the best interests of the beneficiary(ies) and exercising the highest level of integrity. A trustee is considered to be a fiduciary, and as such is required to manage, preserve and administer a trust with a greater standard of care than he or she would exercise for his/her own benefit. Duties include acting only in the best interest of the trust and its beneficiaries, remaining impartial and managing assets with reasonable care.

Commonly, but perhaps incorrectly, clients often expect a trustee to act not only as a trustee but also as an invest-ment manager, even if the trustee is

not properly qualified in those fields or has a conflict of interest. Further-more, a corporate trustee is typically named in the event that capable fam-ily members or friends are no longer alive or able to serve. Oftentimes, cor-porate trustee companies will use proprietary products or in-house asset managers that may not necessarily be the best choice available. More-over, such corporate trustees do not always have the freedom to recom-mend independent or external asset management solutions.

By separating the trustee role from the investment advisory role, clients accomplish several things. The trustee can isolate fees for trust services (from investment advisory fees), an action that provides pricing transparency and efficiency. The trustee can select best-in-class independent asset man-agement services, which may broaden the investment opportunities for the trust and avoid potential conflicts of interests for the trustee. The trustee can focus on the needs of the end customer and beneficiaries and remain neutral with respect to investment management revenues. The trustee

can also harness the specific and unique capabilities of multiple asset management institutions.

Traditionally, the role of a trustee was quite separate from that of an investment advisor, and we believe this may become more common in the future. We advocate an “open architec-ture” approach to wealth management because we believe it clarifies roles, responsibilities and capabilities while helping to maximize accountability and price efficiency. However, not all corporate trustees are comfortable administering such trusts, either because they do not fit the company’s business model (which generates revenues from in-house asset manage-ment services) or because they are unfamiliar or uncomfortable with the laws and standards that provide isola-tion of fiduciary liability from invest-ment management liability. Clients should thoroughly investigate whether their corporate trustee is willing to and capable of administering trust re-sponsibilities separately from invest-ment management services before appointing a corporate trustee in their trusts documents.

Matthew T. Shafer is a financial advisor with Morgan Stanley Smith Barney in Boca Raton, Florida. Although Matthew T. Shafer has compensated Worth to have this article featured in its publication, it is not a solicitation nor is it intended to provide individually-tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Smith Barney LLC, member SIPC. This article is directed to residents in the states where Matthew T. Shafer is registered. http://fa.smithbarney.com/shaferbarberwinkler/. Trust and other fiduciary services are provided by third parties, including Morgan Stanley Private Bank National Association, a wholly-owned subsidiary of Morgan Stanley. Morgan Stanley Smith Barney and its financial advisors do not provide tax or legal advice. Individuals are urged to consult their tax or legal advisor regarding their own tax, legal, or financial situation before implementing any strategies.

By Matthew T. Shafer

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“Traditionally, the role of a trustee was quite separate from that of an investment advisor, and we believe this may become more common in the future.” —Matthew T. Shafer

Assets Under Management $400 million

Minimum Net Worth Requirement $1 million

Minimum Fee for Initial Meeting None required

Largest Client Net Worth Confidential

Financial Services Experience Shafer, 14 years; Barber, 10 years; Winkler, 10 years

Compensation Method Asset-based and fixed fees; commissions (investment and insurance products)

Association Memberships Investment Management Consultants Association (Shafer)

Professional Services Provided Planning, investment advisory, money management, lending and insurance services

Primary Custodian for Investor Assets Morgan Stanley Smith Barney

Website http://fa.smithbarney.com/shaferbarberwinkler/

Email matthew.shafer@mssb.com mark.m.barber@mssb.com jeffrey.winkler@mssb.com

The Shafer Barber Winkler Group 595 South Federal Highway, Suite 400, Boca Raton, FL 33432 561.393.2066 at Morgan Stanley Smith Barney 130 Kercheval Avenue, Grosse Pointe Farms, MI 48236 313.343.8449 28 State Street, 26th Floor, Boston, MA 02109 617.570.9527

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Managing wealth has never been more complex. In today’s environment, clients require a wealth management team that understands these unique challenges and can deliver coordinated solutions to help meet them. Accordingly, The Shafer Barber Winkler Group at Morgan Stanley Smith Barney provides a central point of access to world-class financial services both within and outside our firm. We manage and organize these solutions to simplify our clients’ financial lives. Our clients derive great confidence and comfort from this synchronized approach. Moreover, wealth management is not a static endeavor. Because the world is constantly changing, our approach to wealth management is dynamic. While each of our clients has a strategic plan that is focused on long-term goals, we vigilantly review changing conditions and respond proactively. Our clients appreciate the high-touch, concierge-level service provided by our team. To ensure that we deliver a customized approach, each partner works with a limited number of families. This allows us to provide responsive and personalized service. If you would like to bring organization to a complex world, you may appreciate the dynamic, comprehensive and attentive approach you will experience with The Shafer Barber Winkler Group.

About The Shafer Barber Winkler Group

Left to right: Jeffrey J. Winkler, Mark M. Barber and Matthew T. Shafer

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How to reach The Shafer Barber Winkler Group

We are ready to help you define and pursue your goals by combining our insight with the resources of Morgan Stanley Smith Barney. Please contact us at 561.393.2066 for an initial exploratory conversation.

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The Shafer Barber Winkler Group at Morgan Stanley Smith Barney is featured in Worth® 2012 Leading Wealth Advisors™, a special section in every edition of Worth® magazine. All persons and firms appearing in this section have completed questionnaires, have been vetted by an advisory group following submission by Worth®, and thereafter paid the standard fees to Worth® to be featured in this section. The information contained herein is for informational purposes, and although the list of advisors presented in this section is drawn from sources believed to be reliable and independently reviewed, the accuracy or completeness of this information is not guaranteed. No person or firm listed in this section should be construed as an endorsement by Worth®, and Worth® will not be responsible for the performance, acts or omissions of any such advisor. It should not be assumed that the past performance of any advisors featured in this special section will equal or be an indicator of future performance. Worth®, a Sandow Media publication, is a financial publisher and does not recommend or endorse investment, legal or tax advisors, investment strategies or particularinvestments. Those seeking specific investment advice should consider a qualified and licensed investment professional. Worth® is a registered trademark of Sandow Media LLC. See “About Us” for additional program details at http://www.worth.com/index.php/about-worth.

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Matthew T. Shafer, CIMA® Senior Vice President, Financial Advisor

Mark M. Barber Vice President, Financial Advisor

Jeffrey J. Winkler Vice President, Financial Advisor

The Shafer Barber Winkler Group at Morgan Stanley Smith Barney

595 South Federal Highway, Suite 400Boca Raton, FL 33432

Tel. 561.393.2066

130 Kercheval AvenueGrosse Pointe Farms, MI 48236

Tel. 313.343.8449

28 State Street, 26th FloorBoston, MA 02109Tel. 617.570.9527

matthew.shafer@mssb.commark.m.barber@mssb.comjeffrey.winkler@mssb.com

fa.smithbarney.com/shaferbarberwinkler/