Why a 2023 Financial Advisor Must Guide Estate Planning
Call an Attorney” Is Not Guidance
Hey there I’m estate planning attorney Paul Rabalais and in this post I’m going to address what a financial advisor’s role should be in their clients’ creating and maintaining their estate plans. So I was reading an article recently that stated that 38% of millionaires have no estate plan. And with more than 20 million millionaires in America today, that means there’s roughly 8 million millionaires in America that have no estate plan. There are a couple of underlying reasons for this (other than the obvious reason that people procrastinate thinking about death and putting estate affairs in order):
First, under our somewhat archaic American Bar Association Model Rules of Professional Conduct, it states in Rule 7.3, and I quote, “A lawyer shall not solicit professional employment by live person-to-person contact when a significant motive for the lawyer’s doing so is the lawyer’s or law firm’s pecuniary gain.” So, according to our attorney rules, if I see you across the room at a cocktail party and I walk up to you and say, “Hi, I’m estate planning attorney Paul Rabalais. I’ve been helping people for 32 years establish and maintain estate plans. Would you be interested in hiring me to help you create your estate plan,” I could be disbarred.
And second, while virtually every definition of holistic financial planning and holistic wealth management provides that estate planning is clearly one of the components of what a comprehensive financial advisor should provide, the financial advisor community, for one reason or another, fails to have significant engagement in their clients' estate planning.
So in this post I’d like to both give financial advisors valid reasons why they must play a significant role in their clients’ estate planning, and if you are a client of a wealth manager, I want to encourage you to approach your financial advisor to help you make sure your wealth and estate are in order.
So, right now you may be wondering, “Why as a Financial Advisor should I incorporate estate planning into my wealth management services?’ Well first, we are currently engaged in the largest multigenerational wealth transfer in American history. Over the next two to three decades, it is estimated that $70 trillion will change hands from aging households passing their estates to their heirs. This wealth shift will reshape the wealth management landscape over the next quarter century and will force wealth managers to alter their existing business models and services. Second, estate planning will be a critical tool for improving client and advisor relationships by providing more value to the holistic wealth management process resulting in increased asset retention. And third, it’s been established that clients of financial advisors want and expect their advisors to help with the estate planning process, and advisors have told me that becoming active in their clients’ estate planning is really the only way the advisor can differentiate themselves from their competitors and from robo-advisors.
The advisor who engages in estate planning with their clients will generate additional revenue through managing more of the client’s assets by overseeing a beneficiary designation and account titling process that includes bringing in scattered accounts from other financial institutions. And, financial advisors retaining the children of their clients after those children inherit their parents' wealth is a significant opportunity. Advisors who create multigenerational practices through estate planning are making sure that heirs get to know their parents’ advisor long before they receive their inheritance.
Now, regarding your role as a financial advisor who guides their clients through estate planning, know that while your client’s estate planning attorney is an essential professional, the financial advisor who has ongoing and periodic communication with clients can also play a significant role in helping clients create an estate plan because the wealth manager is uniquely positioned to understand its clients’ resources, goals, values, and legacy. But to do this, it’s essential that the financial advisor and the estate attorney are on the same page. Coordination in estate planning is key! Since an estate plan is one part of a total wealth strategy plan, it makes sense to have a comprehensive financial advisor involved in the estate planning process to ensure consistency with your client’s financial plan.
And here’s a few more reasons why you comprehensive financial advisors should guide your clients through estate planning. With more and more assets being disposed of through your financial institution’s beneficiary designation, payable on death designations, and transfer on death designations, financial account beneficiary designations must be kept current. It’s vital to keep financial accounts up to date because any named beneficiaries on account paperwork can supersede directions provided in the will or trust, and the failure to update can lead to undesired estate outcomes.
And as major life events unfold for your clients (for example divorce, remarriage, or death of a beneficiary), updates to beneficiaries and other estate documents are needed. The advisor who plays a key role in the estate plan will help identify the accounts that are affected and can help make the appropriate changes to support the client’s plan. In addition, who better to ensure that a client’s financial accounts are titled correctly, particularly when a revocable living trust is involved, than the financial advisor.
While some people may say that it’s the estate attorney’s job to ensure all beneficiary designations and financial account titles are where they need to be, and there’s some truth to that, the financial advisor, who has a compensation structure that encourages periodic wealth management reviews is often the professional best suited to spot changes in life circumstances that would warrant the update to an estate plan.
So, if you’re a financial advisor who wants all of the benefits of being a holistic wealth manager who guides their clients through the estate planning process, how do you do it? Well, it’s not enough to say, “Mr. Client, I’ve screened these three attorneys and you should call one of them and hire them to create your estate plan.” Rather you should simply start an estate planning conversation with your clients by inquiring what, from an estate planning perspective, is most important to them, and, you’ll likely hear responses like: “I don’t want to leave a hassle for my survivors,” or “I want to make sure my spouse is taken care of,” or “I want to make sure that I appoint the right people to handle things for me or my estate in the future,” or “I want to be fair or equal to my children,” or “I have one or more unique circumstances with my heirs that I need to address, such as:
blended family, wanting certain assets to be distributed a certain way, or one or more heirs that should not inherit in a lump sum” or “I want to avoid taxes or government intrusion.”
Now, you don’t need to have all of the answers, you just need to ask the right questions to start a discussion where the client can communicate, in their own terms, what they want to ensure that they address in their estate plan. Once you initiate that dialogue, you can help your client by asking them “Why” that issue is important to them, or “If you don’t address that issue, what are you concerned might happen?”
Having your client reveal these emotional reasons why they know they need to address their estate planning is going to enable you to create more engagement and more value in your client relationship. And know that once that estate planning conversation starts to get in the weeds, you don’t want to answer all of their estate planning legal questions because you aren’t the professional who will be creating their estate plan, AND you don’t want to be rendering legal advice in violation of Unauthorized Practice of Law provisions, you will simply let them know that you will guide them through working with an experienced estate planning law firm so that your clients will get all their answers and will have all their concerns addressed.
So if you do consider yourself a holistic wealth manager who wants the benefits that come from engaging in your clients’ estate planning, including increasing your client’s lifetime value, uncovering unmanaged assets, and providing increased client satisfaction to your clients, make sure you find that estate attorney solution so that your clients benefit and you grow as a financial advisor.
As a possible resource of yours, I’ve built a national estate planning law firm that is designed to easily allow wealth managers, at no expense to the advisor, to become their clients’ hero by inspiring your clients to successfully make sure their estate is in order. And with video conferencing and our national network of co-counsel attorneys, each of your clients, no matter where you work, where clients live, or where we are, you can be confident that your clients will be provided with reliable, consistent, and predictable estate planning legal services. And since your clients will want you to participate in these video estate planning design and review meetings, you will be both increasing your client engagement and retention, while gradually improving your estate planning knowledge, skill and ability to communicate,allowing you to be even more valuable as a comprehensive wealth manager to your clients. To review our firm’s multi-step process that each client goes through while being driven by their financial advisor, click the link below. Have a great day.