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The Importance of Trustee Selection

Years ago, while I was still practicing law full-time, I was hired to help administer the trust of a man from my church that recently died.  The trustee was one of the man’s sons. I thought it would be fairly simple.  The property in the trust consisted of a house, a bank account and a brokerage account worth around $75,000.

Perhaps I should have been more clear about explaining the trustee’s role because almost as soon as the son gained control of the assets, he invested some money in the stock of a company that immediately lost all its value!  When I asked why he chose that investment, his response was “that’s what dad would have done”.  Fortunately, the brothers got along and the loss wasn’t enough to fight over.  But, the lesson is clear. Even the most competent individuals should not be a trustee.   A professional trustee is almost always a better choice because they have experience; they can remain emotionally detached from the job; there are no surprises.

Unfortunately, most people do not choose a professional trustee.  The reasons vary.  Many banks insist on assuming all the responsibility of a trustee including the investment management of trust assets.  Many people don’t have a relationship with a bank that offers trust services.  Trustee fees can be hard to swallow.   As a result, friends and family members are the first choice.

Yet today there are alternatives.  Trust companies exist solely to carry out the administrative and record keeping function of a trust.  The trust’s current financial advisor can handle the management of assets owned by the trust.  Because the trust has two professionals making sure that the intentions of the trust are carried out, the chance of a big mistake happening like the one I described above are less and less.


About LPL Financial
LPL Financial (Nasdaq: LPLA) was founded on the principle that the firm should work for the advisor, and not the other way around. Today, LPL is a leader in the markets we serve,* supporting nearly 20,000 financial advisors, and approximately 800 institution based investment programs and 500 independent RIA firms nationwide. We are steadfast in our commitment to the advisor-centered model and the belief that Americans deserve access to personalized guidance from a financial advisor. At LPL, independence means that advisors have the freedom they deserve to choose the business model, services, and technology resources that allow them to run their perfect practice. And they have the freedom to manage their client relationships, because they know their clients best. Simply put, we take care of our advisors, so they can take care of their clients

*Top RIA custodian (Cerulli Associates, 2020 U.S. RIA Marketplace Report); No. 1 Independent Broker-Dealer in the U.S (Based on total revenues, Financial Planning magazine 1996-2021); No. 1 provider of third-party brokerage services to banks and credit unions (2020-2021 Kehrer Bielan Research & Consulting Annual TPM Report); Fortune 400 Company as of June 2021. LPL and its affiliated companies provide financial services only from the United States.

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