Common mistakes when choosing a trustee in Switzerland

The mistakes choosing a trustee that families regret most are rarely dramatic. They are quiet shortcuts taken at the start: a name accepted on a recommendation, a quotation compared in isolation, a handshake where a written scope was needed. A trustee relationship can last for decades, so a small gap in the selection process tends to widen with time.

This page takes the errors one at a time, explains why each is costly and gives a correction you can apply before you sign. It is general information, not advice: what suits you depends on your residence, your beneficiaries, the assets involved and the governing law of the trust. For the positive method, see how to choose a trustee in Switzerland.

Mistake one: choosing on price alone

A low quotation is the most tempting basis for a decision because it is the easiest to compare. It is also the least informative. Trustee work is mostly invisible when it goes well: decisions minuted, accounts kept, beneficiaries answered, regulators satisfied. A provider that charges less may be doing less of that work, or may be pricing the first year and recovering the difference later through extras.

Why it costs you. Cheap engagements often exclude the tasks that matter most: attending family meetings, handling distribution requests, preparing reports for tax authorities abroad. Each one then becomes a separate charge, or is simply not done.

How to avoid it.

• Ask what is included in the stated fee and what is billed separately.
• Compare structures, not totals: fixed, time-based and asset-based models behave differently as a trust grows or becomes complicated.
• Remember that fees depend on the structure and are discussed after a confidential assessment, so any early comparison must be like for like.

Our pages on how trustees are paid and on fee models side by side explain what to look for.

Mistake two: skipping the approval check and the references

Many people assume that anyone describing themselves as a trustee in Switzerland is supervised. The law is more specific. Under the Financial Institutions Act (LEFin / FinIA), 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 under the deed of a trust within the meaning of the 1985 Hague Convention. A professional trustee based in Switzerland must be an individual enterprise, a commercial company or a cooperative entered in the commercial register (Art. 18 LEFin), and trustees fall under FINMA supervision, exercised day to day through a supervisory organisation (Art. 61 LEFin).

Why it costs you. A provider outside this framework, or one that has not completed authorisation, cannot offer the safeguards the system is built around. Discovering that after assets have moved is slow and uncomfortable.

How to avoid it.

• Check that the candidate appears on the FINMA list of authorised and supervised asset managers and trustees, and note which supervisory organisation oversees it.
• Ask for the commercial register entry and confirm the legal form matches what you were told.
• Ask how many qualified people sit on the management: the law requires at least two persons with adequate training and professional experience (Art. 20 LEFin).
• Speak to professional references, such as the lawyer or banker who has dealt with the candidate, and ask what happened when something went wrong, not only when things went smoothly.

Approval is a floor, not a verdict on quality. Our guide to what FINMA and SO-FIT approval means for you sets out what it does and does not tell you, and the due diligence questionnaire turns it into questions you can send.

Mistake three: ignoring continuity

A trust is meant to outlast its creator, yet many families appoint a trustee as if the relationship were permanent and the person never changed. An individual trustee can fall ill, retire or die. A firm can lose its key person, be sold or reorganise.

Why it costs you. Without a named successor and a clear mechanism, the trust may have no one able to act at the moment decisions are needed. Banks freeze instructions, beneficiaries wait and relatives start to improvise. Replacing a trustee in a crisis also removes the time you would otherwise use to compare candidates.

How to avoid it.

• Ask who would act if your main contact were unavailable, and how the handover would work.
• Check that the trust deed names who may appoint and remove trustees, and consider a successor trustee arrangement.
• Ask how files, minutes and bank records are kept, so that an incoming trustee receives a complete record.

The topic is developed in continuity planning when the trustee is not there, and the practical consequences are described in your individual trustee has died or retired.

Mistake four: signing a vague engagement letter

The engagement letter, together with the trust deed, defines what the trustee will actually do. When it is general ("administration of the trust"), disagreements about scope surface later, usually at the worst moment.

Why it costs you. A vague letter leaves open who decides on investments, who talks to the bank, how often you receive accounts, what reporting is provided and how the trustee can be replaced. It can also hide broad exclusions of liability.

How to avoid it.

• Require a written description of services, reporting rhythm and decision process.
• Read any exculpation clause carefully and ask for it to be explained in plain language.
• Confirm what happens on termination: notice, handover and cooperation with a successor.
• Ask how the trustee will keep the supervisory body informed of changes, since changes of facts must be notified to the supervisory organisation in advance.

What the mistakes look like in sequence

The following illustration is invented. A family established in Lausanne appoints a trustee mainly because its quotation was the lowest. Each decision seems reasonable at the time; together they produce a problem that nobody notices until it is expensive.

The cost here was not the low fee. It was the absence of the checks that would have exposed the weaknesses early.

Other pitfalls worth naming

Smaller errors travel with the four above. Confusing a friendly adviser with a regulated trustee is common. So is appointing a candidate who also advises the bank or the company the trust owns, without examining the conflict. Families also tend to skip a conversation about how the protector and trustee will work together, which our page on the trustee, protector and beneficiary triangle addresses.

If you realise you have already made one of these mistakes, it is usually fixable. Changing trustee step by step describes how.

A short checklist before you appoint

• Confirm the candidate appears on the FINMA list and note its supervisory organisation
• Check the commercial register entry and legal form
• Ask who makes up the qualified management
• Obtain at least professional references and speak to them
• Compare fee structures like for like, including what is billed separately
• Ask who acts if your main contact is unavailable
• Check the trust deed for who appoints and removes trustees
• Read the engagement letter for scope, reporting, liability and termination
• Keep a copy of every document in a place the family can reach

Our longer steps to choose a trustee follow the same logic in more detail.