Are Today’s Trust Platforms Relevant to Individual Trustees?

1. Are Today’s Trust Platforms Relevant to Individual Trustees? FIRMA 22nd National Risk Management Training Conference Chris Heilmann, Chairman & CEO – Merrill Lynch Trust Company Orlando, FL - April 8, 2008

2. Agenda • The Trends • The Opportunity • The Decisions • - Choosing A Trustee • - Choosing a Provider • An Example of a Fully Integrated Offering • Managing Risk in an Integrated Environment

3. The Trends….From a TransactionalFocus… • Twenty five years ago, clients were focused on: • Protection in the event of incapacity • Bill Payment Services • Timely income and principal distributions • Principal preservation • Understanding their statements

4. The Trends…..To an Advice and Solutions Focus • Today, trust clients are interested in: • Establishing and achieving their goals • Aligning the right team to meet their needs • Designing wealth transfer strategies • Family educational programs • Philanthropy and passing on family values • Proactively managing assets to meet tax challenges; managing concentrated positions

5. The Trends • Two important industry trends – • Increase in non-bank providers • Increase in the use of individual trustees

6. The Trends • Non-bank providers of trust services have exploded in the past ten years • Full Service Brokers • Independent Financial Advisors • Attorneys and CPAs • Independent and Private Trust Companies • Insurance Companies • There are nearly 600 non-bank trust companies in the U.S. (Tiburon Strategic Advisors, June 2005)

7. The Trends • Impact of Market Consolidation • Approximately two-thirds (64%) of all institutional personal trust assets are held in the top 10 banks / trust companies • Approximately 84% are held in the top 25 institutions • (SpectremGroup’s 2007 Update of Personal Trust Asset Trends Among U.S. Banks and Increasing Opportunities for Successor Trustees)

8. The Trends • Increase in the use of individual trustees • Wealth < $1 million – 28% have set up a trust • Wealth > $ 1 million – 42% have set up a trust • 80% of these trusts have Individual Trustees! • Primary reason (53%) – WANT TO MAINTAIN CONTROL OF ASSETS • (SpectremGroup’s 2007 Update of Personal Trust Asset Trends Among U.S. Banks and Increasing Opportunities for Successor Trustees)

9. The Opportunity • Declining trend in use of corporate trustees by America’s wealthiest households • A vast majority of UHNW households use a family member as a trustee • Baby boomers are getting into the estate planning process earlier than their parents and are better informed • There is nearly $3.3 trillion in personal trust assets (the number of personal trusts has doubled in the past 10 years) • Two-thirds of personal trust assets are held in revocable trusts and one-third in irrevocable trusts • (Tiburon Strategic Advisors, June 2005)

10. The Opportunity • Compelling Demographic Change • Over next 2 decades, 1 in 4 Americans will be age 60+ • 2000–2010, the number of individuals 85+ is expected to rise by over 43% • Average age of a private client (with $1 million+) is over 60 • (Source -VIP Forum - US Census Bureau International Database 2006)

11. The Decisions • Choosing a Trustee • Choosing a Provider

12. Choosing a Trustee • The Best Trustee • Good common sense / competence • Scrupulously honest • Right age • Time • Familiarity with family and family values

13. Choosing a Trustee • The Options • Individual • Family Member • Corporate Trustee • Co-Trustees • Administrative Trustee • Professional Trustee • Private Trustee

14. The Factors • Asset Mix • Investable assets • Illiquid assets • Closely-held assets • Real estate • Family Dynamics • Second marriages • Complex families • Geographically dispersed • Wealth creators vs. younger generations Choosing a Trustee • Other • Fees • Advisors • Control • Privacy • Type of Trust • Dynasty Trust • Charitable Trust • GRAT • Private Foundation • Estate Administration

15. Choosing a Provider • The Corporate Trustee • Asset management capabilities • Staff turnover • Number of relationships per trust officer • Proximity of trust office staff to clients • Investment performance • The “soft issues” – beneficiary education, family events, etc.

16. Targeting the Individual Trustee Investment Advice Principal & Income Accounting Tax Preparation Needs of the Individual Trustee Advice and Guidance on Distributions Investment Management Charitable Valuations

17. Choosing a Provider • The Individual Trustee Investment OnlyModel Managed AgencyModel

18. A Tiered Approach • Managed Agency • Discretionary investment management • Complete administrative services • Special assets • Investment Plus ala carte services • Self-directed investments • Trust investment policy statement • Administrative services: P&I accounting, • Bill paying, tax preparation, distribution guidance • Investment Only • Trustee directed investments Create Successor Trustee Opportunities

19. An Example of a Fully Integrated Trust Offering Tailored solutions to coincide with client need… Self-Trustee SolutionsCorporate-Trustee Solutions Trust Co. as Corporate Fiduciary • Full suite of trust administrative, investment management, and fiduciary services for personal trusts • Trust Co. acts as fiduciary investment manager and trustee / co-trustee • IRA Custodian or Trustee • Estate Settlement • Philanthropic Planning and Services • Delaware Trust Structures Managed Agency Services Brokerage with ala carte Trust Services • Investment Management with Fiduciary Investment Offerings • Trust Co. serves as Agent for individual trustee(s) or personal representatives • Full Administrative Services as Agent for the fiduciary Brokerage Platform Open Architecture • Inclusive of Brokerage Platform with Control and Customization • P&I Accounting • Fiduciary Tax Preparation • Bill Payment Services • Directed Distributions • Valuation services • Full brokerage platform and suite of investment options and capabilities • Elder Care Services via alliance • Valuation services • Marketing materials

20. Managing Risk • Taking a “holistic” approach – LARC Process • Risk Management Operating Committee / Board • Training - Embedding Risk Management in your Culture and Fabric • Involving the client as a “member” of the Risk Management Team • Delicate Balance – To deliver sophisticated products and services for our clients…and to manage risk and jealously protect our integrity as fiduciaries.