The Why Behind Moneta’s Self-Funded Trust Company

The leadership team at Moneta says the firm’s recent launch of its own trust company fortifies its independence and commitment to helping clients transfer their wealth from one generation to the next.

Experienced advisory industry practitioners know all about the critical role played by trust companies when it comes to servicing retirement clients’ intergenerational wealth objectives, but the job they do is not always well understood by individual investors.

As defined by Investopedia, a trust company is, at its core, a separate corporate entity owned by a bank or other financial institution, law firm, or independent partnership. Its function, as the name suggests, is to prudently manage trusts, trust funds, and estates for individuals, businesses, and other entities such as corporate sponsored retirement plans.

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In today’s defined contribution (DC) plan industry, independent investment advisers tend to rely on unrelated third parties to play the role of a trust company, but that is not universally true. Indeed, Moneta is the latest independent registered investment adviser (RIA) firm to take the step of launching its own independent trust company. Technically, the Moneta Trust is chartered pursuant to Kansas statutes as a non-depository retail trust company and regulated by the Kansas Office of the State Bank Commissioner. Moneta Trust is a wholly owned subsidiary of Moneta Holding Corp., which itself is a wholly owned subsidiary of Moneta Group LLC.

Explaining the move, Moneta CEO and Chairman Eric Kittner, says the launch of the trust company aligns with his firm’s broader commitment to fiduciary practices and independence, especially as more of the firm’s advisers are being called upon by clients to plan for and support intergenerational wealth transfers.

“Our advisers and clients have been asking for this to more efficiently pass on their net worth to the next generation,” Kittner explains. “Furthermore, we are demonstrating our commitment to deliver on their long-term needs without the influence of outside funding. Investing in your own trust company is not something a firm that plans to sell in five years does.”

In practice, creation of the Moneta Trust will enable clients to appoint a single corporate trustee for both liquid and illiquid assets held in trust. Thus, a singular trustee can oversee and help to simplify the intergenerational transfer of wealth. Kittner says this is a timely development, given the fact that wealth transfers are expected to approach $70 trillion over the next 25 years.

“The numbers are astounding in terms of the need for advice around wealth transfer from one generation to the next,” adds Moneta Partner Gene Diederich. “Because we are often in the driver’s seat with clients as they design their wealth transfer plan, we have intimate knowledge of how to execute it in a way that is best for their family, and now we can do so with the resources of Moneta Trust.”

Echoing Kittner, Diederich says the launch of the trust shows the 100% employee-owned advisory firm “is not looking to cash out to private equity or an aggregator.”

“We are demonstrating that we are a dedicated group of practitioners in this space,” Diederich says. “Sure, we may be leaving some financial chips on the table by being so committed to independence, given the extremely high multiples that other firms have earned when they have sold. Ultimately, we think our clients are well served by our desire to be independent and to not have external corporate ownership.”

For context, this development comes at a time when the broader retirement plan advisory industry is seeing record-setting merger and acquisition (M&A) activity. Many of the deals involve previously independent firms join larger financial services conglomerates which themselves may operate trust companies or have close ties to established trust companies—in addition to being able to provide ancillary benefits and insurance services and products.

As explored in a blog post published by Bob Pennington, regional director of Pendleton Square Trust Company, an RIA’s service offering can be substantially improved through the best-in-class services and collaborative approach provided by the right independent trust company.

“A resourceful and experienced independent trust company that works effectively with clients and their advisers in handling trust distributions, managing trust accounting and reporting, providing oversight of investments, and coordinating interested parties can add significant value to the wealth management services provided by an RIA,” Pennington says.

Among other factors, Pennington says the growth and success experienced over the last decade or more by independent RIAs has increased demand for reliable, effective trust services from outside providers.

“For example, financial institutions [such as brokerage wirehouses] aren’t in the habit of providing standalone trust services for their former advisers and clients,” he explains. “Enter the independent trust company.”

LPL and SmartAsset Partner in Vendor Affinity Program

LPL Financial is putting its affiliated advisers on an inside track to mine consumer prospects via SmartAsset’s digital platform and connection service.

LPL Financial has selected SmartAsset, a platform provider that connects advisers and investors, for inclusion in the LPL Vendor Affinity Program (VAP).

The Vendor Affinity Program, launched in July 2015, consists of a centralized repository of vendors that have agreed to provide their products and services to LPL advisers at discounted prices.

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As of June 8, more than 18,000 independent financial advisers affiliated with LPL will be able to utilize SmartAsset’s SmartAdvisor platform, which connects validated consumer prospects with fiduciary financial advisers in markets across the U.S.

As explained by Rob Pettman, LPL Financial executive vice president, wealth management solutions, VAP is designed to help advisers reduce the complexity and costs of running their business. Vendors are selected for inclusion in the program based on adviser demand, the ease of using their product or service, and their ability to meet LPL’s security and compliance requirements, he says.

“As the need for digital marketing solutions increases, we recognize the value that a tool such as SmartAsset can be to advisers looking to grow their practice,” Pettman says. “SmartAsset gives them a new way to connect with investors across the country, digitally, while also freeing up time to spend with their existing clientele.”

Michael Carvin, founder and CEO of SmartAsset, says his organization is “thrilled” to be added to the LPL Vendor Affinity Program.

“We’re seeing a major shift in the way advisers grow their business, as more individual RIAs [registered investment advisers] and firms turn to digital marketing channels to boost investor prospecting and, in turn, growth,” he says.

Carvin says the average SmartAdvisor validated investor is about 57 years old and has investable assets of $890,000. In this group, 76% reported that they do not currently have an adviser, while approximately 70% are retired or less than 10 years from retirement.

According to the firms’ joint announcement, LPL Financial-affiliated advisers will also have the opportunity to utilize SmartAsset’s Live Connections service. Exclusively available to advisers on the SmartAdvisor platform, Live Connections is billed as “a new way of delivering high-intent, validated consumer prospects via a warm phone transfer to RIAs and firms to meet today’s on-demand expectations.”

Carvin says Live Connections can reduce advisers’ marketing burden by eliminating the time they spend prospecting, contacting and following up with consumers.

More information about the prospecting solution is available here: https://smartasset.com/financial-advisor/about.

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