There was a concerning report this week from the respected Society of Trust and Estate Practitioners (STEP) warning that there is only one mainstream bank left willing to consider opening an account for a straight forward trust without being offered significant values or other incentives.
The upshot is that banks are seemingly becoming reluctant to transact trust business and imposing stricter conditions on trusts they do allow.
The worry here is that Financial Planners and Wealth Managers, who often use trusts as a basic part of good Financial Planning, will be hampered from using trusts for clients in some cases in future with potentially serious consequences.
STEP says more worryingly trustees are also experiencing existing accounts for trusts being closed, sometimes with little notice or explanation.
The culprit here, at least from the banks’ point of view, is the substantial compliance burden they face in accepting and managing trusts.
The risk is that the banks could back away for good from accepting trust business which would have major implications for clients with trusts.
Emily Deane TEP, technical counsel and head of government affairs at STEP, warned that trustees were increasingly “struggling” to access the banking services they need simply to administer trusts.
STEP, which has 23,000 members in 120 countries, has published a Trust Banking guide to try and help. Ultimately, however, the regulators may need to step in to ensure that trusts are not excluded from banking which would be near disastrous if it happens.
STEP says much of the problem is being driven not by trusts being legally unsuitable for banking but by the compliance burden banks increasingly face. The sometimes opaque nature of trusts does not always help but equally a trust is a perfectly legitimate legal structure.
The issue is that banks must identify and verify trustees as well as understand the wider structure of ownership, benefit and control, potentially including settlors, beneficiaries, protectors and others exercising control. This can make trust onboarding considerably more complex than other business.
Trusts are a key tool for many Financial Planners and it would be a great loss if banks turn away from them.
There is certainly a case here for government and regulators to review the issues and take appropriate action before it is too late.
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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and daily news. This topical comment appears most weeks, usually on Fridays but occasionally other days. Email: