Case study: choosing a trustee between three candidates

This case study on choosing a trustee follows a founder who had to pick one trustee from three candidates. The people and the situation are fictional, built as an illustration; they describe no real client, trustee or firm. The method, however, is one you can reuse: write the criteria down before meeting anyone, score each candidate against the same grid, and read the result with its limits in mind.

The situation: a founder with a shortlist

Imagine a founder based in Lausanne, whom we will call Mrs Keller. She has built a manufacturing business and wants to place part of her private wealth in a discretionary trust for her children and, later, her grandchildren. She has taken advice on the trust deed. What remains is the choice of trustee, and a colleague has given her three names, which we will call Candidate A, Candidate B and Candidate C.

All three are professional trustees established in Switzerland. All three answered her first questions politely. Candidate C quoted the lowest level of remuneration at the first conversation. Candidate A was the most expensive of the three. Mrs Keller's instinct was to start with C and negotiate. Her lawyer suggested instead that she first decide what she was actually buying.

The questions she wanted answered were broader than cost:

• Is the candidate regulated, and by whom?
• Who would actually handle her file, and who covers for them?
• How does the candidate deal with a protector, with a letter of wishes and with a disagreement?
• What happens if the relationship fails?

If you are still at the earlier stage of drawing up your own method, the guide on how to choose a trustee in Switzerland covers the full sequence; this page shows one version of it in use.

Step one: check that each candidate is a regulated trustee

Before any scoring, Mrs Keller applied a pass-or-fail filter. Under Swiss law, a trustee is a person who, on a professional basis, manages a separate pool of assets or disposes of it for a beneficiary or for a defined purpose, on the basis of a trust deed within the meaning of the 1985 Hague Convention (Art. 17 para. 2 FinIA, known as LEFin in French and FINIG in German). Trustees are financial institutions under Art. 2 para. 1 let. b of the same law.

That status brings supervision. Under Art. 61 FinIA, trustees are subject to FINMA supervision, which associates a supervisory organisation; day-to-day supervision is carried out by supervisory organisations that FINMA itself has authorised. SO-FIT is one such organisation, and the FINMA list also names OSFINcontrol AG, AOOS and OSIF. Mrs Keller asked each candidate to name its supervisory organisation and to confirm that it appeared on the FINMA list. She did not rely on the answer alone: she checked the list herself. Our guide to FINMA and SO-FIT explains what that approval means in practice.

All three candidates passed. A filter of this kind rarely eliminates anyone in a case like this one, but it does eliminate unregulated offers, and it would have ended the process there for any candidate who could not answer.

Step two: the scoring grid

Mrs Keller and her lawyer then fixed six criteria and a weight for each, in writing, before the second round of meetings. Fixing the weights first matters: it stops a pleasant meeting or a low quotation from quietly rewriting the priorities.

The grid is deliberately qualitative. Mrs Keller used a simple one-to-five scale for each box, but the table shows only the level, because the level is what her family would discuss.

What each criterion tested

Governance. The law requires the management to include at least two qualified people (Art. 20 FinIA), and a trustee must hold a minimum capital of CHF 100,000, paid up in cash, with suitable guarantees or professional liability insurance (Art. 22). These are floors, not distinctions between good and mediocre providers. She therefore asked how the candidates went beyond them: who sits above the trust officer, how decisions are minuted, how the annual audit required by Art. 62 is handled.

Depth of the team. This is where a small candidate can look attractive in the first meeting and weak a few years later. She asked who her day-to-day contact would be, who would stand in during an absence, and what the plan is if that person leaves. The guide on continuity planning develops this point.

Protector and letter of wishes. She wanted to know how each candidate worked with a protector and how a letter of wishes is kept up to date. Pages on working with a protector and on letters of wishes show what a clear process looks like.

Information to beneficiaries. What does the trustee owe beneficiaries, and in what form? The answers differed more than she expected, and the guide to what a trustee owes the beneficiaries helped her interpret them.

Business-holding experience. Her main asset is a family company. A trustee who has dealt with a company held inside a trust, with its shareholder decisions and a possible future sale, is better placed than one who has only managed portfolios. See a trustee for a trust holding a family business.

Fee clarity. She did not score the level of fees, only whether she could understand how they would be calculated and what would trigger additional charges. Trustee remuneration depends on the structure and is normally set out after a confidential assessment, so what she could compare at this stage was the model, not a final amount. The page on how trustees are paid sets out the usual models.

Step three: reading the scores

After the second round of meetings, Mrs Keller and her lawyer scored each candidate against the grid and applied the weights. The overall result is shown below, as a qualitative reading rather than a measurement.

Candidate A won. It was the most expensive of the three, and that is the reason this case is useful. The grid did not reward cost, because cost was never the question the family needed to answer. The question was which trustee would still be performing well when the founder had sold or handed on the business, when the children were adults asking for information, and when the original contact person had moved on.

Why the winner was not the cheapest

Three observations explain the outcome.

First, a lower quotation often reflects a thinner service. Candidate C's offer was attractive because the team was small and the process lighter. That is not a fault in itself, and for a simple structure it may be perfectly adequate. Here, with a company held in the trust and several generations of beneficiaries, the lighter process carried a cost of its own: weaker continuity and less structured reporting.

Second, the cost of a poor choice falls later and elsewhere. Replacing a trustee, reconstructing missing records or resolving a dispute with beneficiaries is expensive in time, in family goodwill and in professional costs. The comparison on switching trustee or staying and fixing the relationship shows how heavy a later change can be, and changing trustee step by step describes the work involved.

Third, the fee structure was only one of six criteria. Candidate C scored well on clarity of its fee structure, which is not the same as scoring well overall. Mrs Keller kept the fee criterion separate from the level of fees precisely so that a low figure could not hide weaknesses in the other five.

The limits of this case

A scoring grid supports judgement; it does not replace it. Several limits apply:

• The weights reflect one founder's priorities. A family with a simple portfolio and no company might weight depth of team and business experience far less.
• A score depends on what the candidate says and shows during meetings. It is wise to ask for documents and to check what you can verify, as in the due diligence guide.
• Residence of the settlor and the beneficiaries, the nature of the assets and the canton can all change the analysis, including the tax analysis, which this page does not address.
• Regulated status and good scores reduce risk. They do not remove it.

For a structured way to run the same exercise, the twelve steps to choose a trustee offers a checklist, and the common mistakes when choosing a trustee lists the pitfalls this case tried to avoid.

A short checklist drawn from the case

• Confirm each candidate's authorisation and supervisory organisation on the FINMA list
• Write the criteria and their weights before the second round of meetings
• Score every candidate against the same grid
• Keep the level of fees apart from the clarity of the fee structure
• Ask who covers for your contact person, and in what circumstances
• Record the reasons for your choice in writing