10 Reasons to Change Trustees

With the increasing complexity in accounting and tax regulations, choosing the right trustee to manage your company’s financial affairs is crucial for its success and wellbeing. However, too often you may end up feeling stuck with a trustee who doesn’t provide the type of quality service that you and your business deserve. In this article, we delve into the top ten reasons why you might consider transitioning to a new trustee, along with the benefits that a good trustee can offer.

What is a trustee?

The term “trustee” is often associated with the specific person who acts as a custodian for the assets held within a trust. However, the German term “treuhand”, which is roughly translated as “trustee” or “fiduciary” in English, is a somewhat broader term which refers to various types of fiduciary relationships.

The key feature of a trusteeship is that the trustee is given permission to act on behalf of their client in matters ranging from asset management to bookkeeping and filing tax returns. The trustee has a legal responsibility to act in the best interest of their client, with honesty and transparency. While such a fiduciary relationship is usually formalised through legal and contractual means, it is important for the client to have confidence in the integrity and competence of their chosen trustee.

Common responsibilities of a trustee in Switzerland include:

• Providing sound legal advice.
• Giving tax advice and managing all the legal aspects of tax compliance including filing tax returns, registering for VAT, corresponding with the tax authorities, etc.
• Accounting and bookkeeping services.
• Managing a company’s payroll.
• Conducting audits for their clients.
• Asset management.

Do you need a trustee?

You may be tempted to manage your business without the help of a professional trustee who takes care of all your accounting and tax needs. Handling your own bookkeeping, tax returns, and payroll may seem like a logical way to save money that you would have to spend on hiring a trustee to do it for you. But don’t conclude too easily. Business owners who understand the truth of the saying, “time is money”, know the importance of passing on time-consuming tasks to someone who can do it more efficiently and accurately.

Let’s look at some good reasons why it makes sense to hire a trustee for your business, irrespective of its size:

1. Reduces costs:

At first glance, it may look like outsourcing your accounting and tax matters to an external trustee would be an additional cost for your business. However, a good trustee should actually save you money on the whole. If you have to manage your own accounts, you may incur high opportunity costs due to not putting that time to more valuable use. Furthermore, doing your own accounting internally itself requires investment in resources such as software systems and equipment, hiring additional full-time employees, etc. Outsourcing these tasks to a trustee removes all these additional costs.  

2. Saves time:

Whether you are a budding entrepreneur or established business owner, your most valuable resource is your time. Passing on time consuming tasks to a trustee allows you to focus on your core business and maximises your chances of success.

3. Accurate reporting:

Even the smallest mistake in your financial reports or tax returns can have severe consequences. Not only could it mislead your decisions and leave you with a distorted view of your company’s financial situation, but it could also be in direct conflict with tax or reporting laws. A spot check by the tax authorities or mandatory audit could then mean serious penalties. With the complexities of Swiss tax and accounting laws, it’s easy to make errors if you are not a trained professional. This is where the aid of a reliable trustee is so valuable.

4. Ensures compliance:

In addition to ensuring that you remain within the bounds of the law through accurate reporting, a trustee is responsible for keeping your company compliant with all applicable regulations, from registering for VAT to adhering to complex labour and social insurance laws.

5. Specialised knowledge and expertise:

While you may be able to get by with taking care of your own simple accounting and tax obligations, a good trustee brings valuable expertise and specialised knowledge to the table. This allows them to easily handle more complex situations and unexpected occurrences. Their deep knowledge of tax laws can help you save money by finding ways to legally optimise and reduce your tax liability.

6. Strategic edge:

A modern trustee does so much more than just draw up your accounts and file your tax returns. They are your business consultant and partner, helping advise you on various financial, tax, and operational issues. Having the right trustee by your side can really give your company a strategic edge and boost your profitability.

Ten reasons to change your trustee

There are many reasons why you might want to consider changing your current trustee. Here are the top ten:

1. Lack of expertise

Performing the duties of a trustee requires a high level of expertise. A trustee is required to take care of many vital tasks which involve managing assets, ensuring regulatory and tax compliance, and keeping the books of the business accurate and up to date. Furthermore, tax laws and accounting regulations are complex and constantly evolving. A competent trustee should stay up to date with these changes and have a deep understanding of how they apply to your specific situation.

If you find that your current trustee is unable to properly answer your questions, cannot perform all their duties with competence, or is not knowledgeable about the latest regulations, it’s a clear indicator that you need to consider finding someone who is better qualified.

2. Inefficient management

Your trustee may be managing assets and making investment decisions on your behalf. If they consistently fail to manage your assets effectively and make poor investment decisions, or are not responsibly overseeing properties or other assets, a change might be necessary.

3. Poor communication and lack of transparency

A good trustee should always be accessible and communicative. If they become unresponsive or dismissive of your concerns, you need to look elsewhere. You may also feel frustrated by your trustee if they fail to keep you informed of your affairs with clear documentation and transparent reports. A clear lack of transparency from your trustee is definitely grounds to terminate your relationship.

4. Conflicts of interest

Your trustee should always be impartial and neutral when making decisions on your behalf, to act rationally for your best interests. If there arises a situation where your trustee stands to personally gain or lose based on decisions related to your business, this creates a conflict of interest which puts your company at risk. In this case, you may be better off finding a new trustee who is not personally invested in your business and investment decisions.

5. Excessive fees

While professional fiduciary services do come at a cost, they should not be unreasonably high, especially when compared to industry standards. It is important to understand that a higher rate doesn’t always equate to a better service. After all, a good trustee should be saving you money in the long run, not placing an added burden on your business. If you are concerned that your trustee is charging you exorbitantly high rates that don’t match up to the quality of service provided, it’s time to consider looking elsewhere for a reliable and cost-sensitive trustee.

6. Inaccurate calculations and record keeping

Your chosen trustee is responsible for handling some of your most critical business data and financial records. It is essential that all calculations are meticulous and your financial reports are kept up to date and accurate. If your trustee makes frequent errors in calculating your annual returns, handling your accounting data, and conducting your payroll, it would be better to find someone who is more competent and careful.

7. Lack of personalised advice and proactive planning

In today’s fast-paced and complex business world, the role of a good trustee encompasses so much more than just mechanically filing your tax returns and completing your annual reports. The right trustee should act as your strategic financial planner, business advisor, and tax optimiser. They should be giving you advice which is tailored to your situation and objectives, and actively help you find ways to increase your profits, maximise your investment returns, reduce your costs, and minimise your tax liability through legal optimisation strategies.

Any trustee which doesn’t go that extra mile to help pave the way to success for you and your business is one that is not worth your time and money.

8. Changing needs

Over time, the nature of your business and your corresponding needs may evolve. If your current trustee no longer has the expertise to manage your changing needs effectively, you may need to upgrade to a trustee which offers a wider range of services and has greater capability to handle your requirements.

9. Ethical concerns

Your trustee is involved in dealing with your sensitive financial and tax matters. It is therefore crucial to work with a fiduciary you know you can trust. If you are concerned that your current trustee is engaging in any unethical or illegal practices, such as providing advice which seems to contradict the law, or not taking the proper steps to ensure you are compliant with tax and accounting regulations, you should act immediately. Such unethical behaviour can put you and your business at serious risk. Finding a moral and law-abiding trustee to safeguard your financial wellbeing is therefore of the highest importance.

10. Analog working methods

If your fiduciary still asks you to send in physical receipts and documents, you are probably in need of a change! The days of manual paperwork are long gone, and any modern and up-to-date trustee should have digitised their services by now.

With digital tax and accounting services, you can directly synchronise your company’s internal accounting system with your trustee and thereby transmit important data in real time. So, if you have not yet done so, make sure you find a good trustee where digitalised service is standard.

When is the best time to change trustees?

While you have the freedom to change trustees at any time, it’s worth considering the timing carefully. The easiest time to shift to a new trustee is on the first day of the financial year once all final year-end tasks have been wrapped up. This allows the new trustee to simply post the opening balance for you in the new system and continue from where your previous trustee left off.

Changing trustees in the middle of the financial year is definitely possible but it becomes more complicated, not to mention costly. If there are unfinished tasks, you may have to pay both your previous trustee and the new trustee for the same work. It is also more difficult for your new trustee to pick up things in the middle of completion, and they will require more documentation and data. If you must change trustees during the financial year, utilising the end of the quarter is better than other arbitrary times.