We manage the investments for hundreds of auto dealers that sell extended warranty programs and place those funds in trust accounts. We have specialized knowledge in selecting trustees, establishing reinsurance companies, and managing the investments in accordance with the trust guidelines.
For funds that exceed the reserve requirements, we are highly experienced at setting up surplus “B” accounts that are free from the reserve account restrictions and can have the opportunity for higher potential investment returns. It gives our clients complete control over this money, to invest and withdraw as they choose without having to work through a trustee or administrator.
With the discretionary relationships we have with our automotive dealer clients, we manage all the responsibilities and details for them, and keep them up to date by communicating on a regular basis.
The principal of a family automotive dealership dealt with multiple service administrators, which ultimately resulted in different trust accounts with each administrator. He did not have a clear picture of what money was in reserve, what money was in surplus, and if he was getting any return on the investments. What’s more, he was paying high fees because he had small accounts in multiple locations and was paying minimums at each. He wanted to know if we could improve this situation.
What we would do:
We would meet with him and review all documents, determine who his administrators were, learn his products, situation, trust agreements and requirements. We would then recommend establishing all accounts with one trustee, with us serving as investment manager, to help lower fees and reduce the confusion from receiving multiple reports. We would identify what ongoing information he wants and create customized reporting to show him important data such as last month’s balance, this month’s balance and the percentage rate of return.
We would explain the benefits of a “B” account, a separate account that can hold any unearned premium reserves (UPR), and how we could open such an account in the name and tax ID of the reinsurance company to legally bypass the regulatory restrictions, avoid the tax ramifications of the trust account, and have a greater opportunity for potential return.
This investment profile is hypothetical and not indicative of any specific situations or clients. It is presented only as an example and not intended as investment advice. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.