Q&A: SPECIAL ASSETS
As technology advances, so do new approaches and trends that help our special assets team. We have previously outlined how Cumberland Trust is uniquely positioned to help maximize assets by being a corporate trustee that does not manage money. Another component of our success in special assets has to do with our dedicated team.
To understand how the team’s experience is an advantage to families, we have taken a closer look at some of the trends driving special assets and the service of those assets. Below, Dayton Hale, Vice President & Senior Special Assets Officer, and Lisa Torch, CTFA, Vice President & Special Assets Officer, weigh in on what’s new in their area of expertise:
1. Are there new trends in the special assets world, or innovative techniques being introduced into the industry that you are seeing?
We are seeing a trend toward moving special assets (especially real estate, timber and oil and gas interests) held directly in trust into entities such as LLC’s and Limited Partnerships. This protects the family from the liability associated with holding real assets. For example, if a trust holds a retail store and a slip and fall incident occurs, the entire corpus of the trust could be vulnerable to damages if the property is not properly wrapped in an entity. This structure aids in protecting the trust from liability claims and can also help with consolidating management of these assets.
Another trend related to special assets is that management is becoming highly specialized. For example, more families are utilizing outside professionals that focus on the management of certain types of assets (e.g., oil and gas, commercial properties or farmland). This ensures more experienced individuals or vendors are properly stewarding each asset, as opposed to a more generalist or in-house approach.
At the same time, we are also seeing the increased use of technology and software to assist in special assets management. Examples of this include programs and vendors that facilitate managing insurance, appraisals, inspections and other management functions. Cumberland Trust utilizes a number of these services in our daily work related to illiquid assets.
2. Why do you think these trends are taking shape?
Because of the complex nature of these assets, families are rightfully desiring to be more involved in choosing managers for them. Many times, these are legacy assets, so they are meaningful beyond their value on paper, and clients want to be confident that these assets are being managed by a party with expertise in that asset class.
As mentioned, the trend is moving toward choosing highly specialized managers for each type of asset (i.e., commercial properties, mineral rights, closely held entities, etc.). However, in other cases, if the expertise to manage these assets exists within the family, families want to have the option to utilize their own depth of expertise for their trust-held special assets. Cumberland Trust understands and works with families to make this possible.
3. What else do you expect to see driving the special asset space?
Families these days have an increasingly weighted asset base towards illiquid assets. These holdings make up the other “hidden half” of client wealth. Having proper management in place is extremely important. It is also important for families to know that their legacy assets will be managed with their needs and their heirs’ future requirements taken into consideration. Many fiduciaries require diversification of assets when special assets in the account reach certain thresholds. In some cases, this may be contrary to the family’s wishes. Cumberland’s unique platform can help families in this regard.
4. How does Cumberland Trust’s special asset practice stand out?
Our platform maximizes the administration of and return on these assets to the benefit of our clients. We achieve this by being free of an investment management arm. We want the best for the investment, its longevity, and ultimately for the family. Since we, as a corporate trustee, take direction from the beneficiaries, we do not have to focus on whether the special asset should be liquidated and invested elsewhere.
Often, family control can be maintained by naming qualified managers within a family to continue to manage certain special assets. This allows unique legacy holdings to be properly overseen by individuals who truly understand the nuances of the holding. Cumberland Trust helps make this possible by arming families with the best resources and people to ensure the family member or professional manager of the asset is well positioned to succeed long-term. Our dedicated Special Assets Department utilizes its combined years of expertise in oil and gas, real estate and business to work with these managers related to all unique holdings.