Fiduciary Decision Making in Respect of Assets Under Trust - Thematic Review 2015

Summary

This is a GFSC thematic review report summarising the findings of a 2015 review into how Guernsey trust service providers (fiduciary licensees) make decisions about assets held under trust. It is an informational advisory document rather than new law or a code, but it restates and clarifies the Commission's expectations under Principle 4 of the Code of Practice - Trust Service Providers, and highlights good and poor practice observed across the sector.

• Scope of review: Based on a questionnaire sent to 156 full fiduciary licensees plus on-site visits to eight firms, covering governance structures, conflicts of interest, investment oversight, governance triggers, performance reporting and charging transparency for each firm's three largest trust clients.
• Asset strategy: Trustees are expected to identify and periodically review a strategy for managing settled assets, considering settlor wishes, risk attitude, beneficiary needs and foreseeable trigger events, and to set measurable performance objectives.
• Investment of assets: Where in-house or group products are used, or where an approved investment manager list exists, trustees must document the rationale, manage conflicts of interest, and demonstrate value for money and ongoing performance review.
• Retrocessions: Trustees receiving retrocessions must fully and transparently disclose them to clients, and may only receive them where the trust deed permits it, to avoid breach of trust and conflicts of interest.
• Reporting and charging: Trustees should provide clients with clear, agreed fee structures before appointment, charge fairly and transparently, and report investment performance and charges to clients at an agreed frequency.

The report does not create new rules but reiterates existing obligations under Principle 4 of the Code of Practice - Trust Service Providers and encourages licensees to benchmark their own arrangements against the good practice examples described, ahead of a future review of the Codes of Practice.

Key obligations

• Trustees must invest, distribute and otherwise manage each trust's assets in accordance with the law and the trust deed (Code of Practice Principle 4).
• Trustees must manage the investment and custody of trust assets professionally and responsibly.
• Trustees must agree a clear fee structure with clients in advance of taking an appointment and charge fees in accordance with that structure in a fair and transparent manner.
• Trustees must provide clients promptly with information to which they are entitled about a trust, including performance and charging information.
• Trustees receiving retrocessions must disclose them to clients transparently and must only accept them where the trust deed permits it.
• Where trust assets are invested in in-house or group products, trustees must document and be able to demonstrate the rationale, how conflicts of interest were managed, and that value for money was obtained for beneficiaries.

Applies to

Trust Service Providers (TSPs), fiduciary licensees, trustees