Professional Conduct, Ethics and Client Relationship Management
Trustee services are a professional service, and conduct obligations flow from the FMC Act 2012, the Trusts Act 2019 and the general law. A trustee must act with integrity, competence and transparency, and must manage the client relationship so that the settlor, beneficiaries and other advisers understand the scope of the engagement. Clear engagement terms, fee disclosure and a documented complaints process are part of good practice.
Ethical traps appear in scenario questions. Common ones: accepting a gift or benefit from a beneficiary; acting for both sides of a transaction without informed consent; continuing to act where a conflict has arisen; and failing to escalate a suspicious transaction under AML/CFT. A candidate should be able to identify the ethical issue, name the rule, and state the correct action - usually disclosure, escalation, or declining to act.
Client relationship management includes managing expectations about distributions, communicating decisions clearly, and keeping beneficiaries informed within the disclosure framework. Where a beneficiary lacks capacity, the trustee must consider the appropriate representative and any court or statutory protections. Confidentiality must be balanced against the duty to disclose to beneficiaries and the duty to report suspicious activity.
Worked example: A beneficiary offers a trustee a holiday as thanks for a favourable distribution. The trustee should decline - accepting a personal benefit from a beneficiary creates a conflict and may breach the no-profit rule. The correct response is to decline politely, document the offer, and disclose it if material.