ESTATE PLANNING
risk remains, he adds.
Indeed, serving a family in a positionof-trust capacity can be more fraught than doing so for non-family, according to Wilmott.“ It’ s probably even worse with family, honestly,” she says.“ You’ ll find that customers are far more forgiving than family members.”
All else aside, it’ s just a bad look for an advisor to fill a position-of-trust role, says Wilmott.“ Regardless of whether you are a good faith advisor, there’ s still the appearance to beneficiaries and regulators that … there is no way someone could really function as both the manager of the assets and the distributor of those assets.”
Walking A Narrow Road
If a firm is going to allow an advisor to serve as a client’ s trustee, executor, or POA at all, the hurdles for that process should be extremely high— for both the firm and the individual advisor. Firms should be sure they’ re in compliance with the SEC’ s custody requirements. A written request should be tendered before the advisor accepts the role, explaining the personal or family relationship, why the client wants them, and why other candidates such as family members or corporate fiduciaries aren’ t feasible. It’ s essential that the documentation is clear when an advisor does execute on their position-of-trust role to ensure that they’ re managing any conflicts appropriately— and to ensure that a successor can step into their role if something were to happen to them, says Wilmott. Structural safeguards, such as the appointment of an independent co-fiduciary, the requirement that there be dual signatures for distributions, and periodic internal reviews, can help contain risk. Advisors should maintain a clear separation between their advisory relationship and their fiduciary role: They should create separate files and maintain careful documentation of when they are acting as advisor and not as a trustee or executor. And they should keep detailed records of every significant decision, distribution
If a firm is going to allow an advisor to serve as a client’ s trustee, executor, or POA at all, the hurdles for that process should be extremely high— for both the firm and the individual advisor.
and fee. If the conflicts become unmanageable or family disputes escalate, they should be prepared to step down from the fiduciary role.
Broker-dealers have reason to be stricter. Their business model is still largely transaction- and product-driven, so roles like trustee, executor or POA can magnify their reps’ conflicts of interest. They also operate under Reg BI, not with a fullblown fiduciary duty, so their supervisory systems weren’ t built for open-ended control over client assets. And when things go wrong, plaintiffs and arbitrators often frame it as a firm-level supervision failure.
When a rep is asked to serve as trustee, executor, POA, or beneficiary, good practice involves demanding detailed written notice and prohibiting any action until a principal approves it. And if such a role is approved, the relationship should be placed under enhanced supervision, with surveillance for unusual transfers or beneficiary changes. Periodic certifications should be required from the rep that there have been no undisclosed payments or conflicts.
Head, Not Heart
One scenario that may seem worthy of an exception is the case where a longtime client has no living family and insists that the advisor is the only person they trust. But, says Chancey, these are the cases where things most often go wrong.“ Lonely clients become more dependent, not less,” he says,“ and after they pass, distant relatives appear with attorneys asking why their estate was administered by their financial advisor.”
Finra addressed such situations directly in Notice 20-38, notes Chancey. It said that a client’ s claim to have no alternative should not, on its own, decide the firm’ s judgment about a position-of-trust situation.“ The regulator already considered the most sympathetic version of this,” Chancey said— and, yes, there’ s still a conflict.
It should go without saying that reps should never commingle personal and client funds. They need to keep careful transaction records and promptly notify their firms should any complaints or allegations about their actions arise. If the firm later decides the risk is too high, the rep needs to cooperate in resigning as fiduciary and helping transition the role.
When advisors say no to positions of trust, they should be prepared to help clients find a qualified alternative. Some firms have referral partnerships— Savvy Wealth, for example, is currently interviewing Charles Schwab, Fidelity and others as resources for advisors seeking position-oftrust solutions. Sometimes advisors may just need to work their networks. Either way,“ ensure your client knows that you are doing this because it’ s in their best interest,” says Wilmott,“ and not because you’ re trying to shirk responsibility.”
54 | FINANCIAL ADVISOR MAGAZINE | JULY / AUGUST 2026 WWW. FA-MAG. COM