Private trust companies booming in Bahamas
Tuesday May 17 2011 | 05:40 AM

On the scene for about five years now, private trust companies (PTCs) are growing in importance to trust and fiduciary service providers in The Bahamas, with a local trust services provider saying they are leading business growth.

“It’s probably our number one growth area in the trust business, and it certainly looks likely to be that way this year too,” Julien Martel, director and head of trust and fiduciaries services at Butterfield Bank (Bahamas) told Guardian Business on Wednesday.

A private trust company is formed to act as trustee for a specific trust or group of trusts, but cannot offer trustee services to the general public. Under traditional trust structures, independent, regulated trustees control the administration of a trust’s assets, but under the PTC regulations, the PTC becomes the trustee. So it allows individuals control of the administration of their trusts.

“Very wealthy clients like to control their own destiny to a greater extent and the PTC gives them that,” Ian Fair, deputy chairman of Butterfield (Bahamas) summarized.

As of March 21, 2011, The Bahamas had 59 PTCs on the books.  Butterfield (Bahamas), with $3.26 billion in trust assets under administration, would not disclose the number of PTCs they had incorporated or the percentage of those trust assets in PTCs. However, Fair described the role they played in the bank’s trust business as “significant,” and said that Butterfield was known to be a PTC expert and leader in the local offshore financial services sector.

At Butterfield (Bahamas), Fair said the majority of the bank’s larger clients now had PTCs. Martel said their rise in prominence was somewhat replacing previous administered bank and trust services offered by the bank.

“What we’ve found is that since the private trust legislation came in, that’s met the needs of the wealthier families who were looking at doing banks on a listed basis, or a trust company on a listed basis,” said Martel. “So the private trust company has taken over from that business line.”

Head of Region Group Trust for Bank of Butterfield N.T. & Sons Robert ‘Bob’ Moore said that PTCs were regularly used in its Bermuda operations as well.  

No matter where the PTC was, however, Moore said the clients interested in them tended to be globally dispersed, with substantial net worth and a desire to maintain control of them in common. New PTC clients are coming from the traditional sources – North, South America and Europe for example, but also from the hot spots for newly-created wealth, such as Asia and Latin America.

“If you have to say where is the business coming from you wouldn’t pick out one place – it genuinely is a global business,” said Moore.  

Much of the business comes from intermediaries like the specialist law firms that represent the ultra-rich and accounting firms. Moore added that the Butterfield group is often able to leverage its institutional relationships for new PTC business as well.  Another financial institution may recognize that Butterfield had the trustee expertise necessary to take care of a wealthy family when that institution did not, he said, sending the family over to Butterfield.

From a business perspective the fact that PTCs tended to be more suitable for wealthier clients made them a key offering for financial institutions playing to the high-end of the market.

“As with many other wealth manager providers, we like to go after a fairly large client and while your range of clients will be fairly broad, you either have a business where you’re servicing the top end of the market or you have a business where you’re serving more of a mass market,” said Fair. “We’re certainly top end of the market.”

The necessary legislation to facilitate the PTC passed in 2006-2007.