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Written by: Steve Lockshin | Vanilla
Over the last few decades, wealth advisors have begun to rethink how they serve their clients. The assets that they directly manage have historically been their top priority; partially because that is how most compensation structures are arranged. When this occurs, the burden of total wealth management shifts back to the client and exposes them to risks, including tax risks, wealth transfer issues, and lack of adequate insurance.
However, the modern advisor has increasingly begun to extend their focus beyond investments and take a more comprehensive view of their clients’ total wealth. By considering the entire financial picture, advisors gain clarity on how assets, goals, family dynamics, and changing life circumstances intersect, providing significantly more context to inform the strategies they develop. This level of visibility can help advisors anticipate potential pitfalls and identify compelling opportunities, which creates more valuable and longer-lasting client relationships.
Advisors who take this more modern, holistic approach must also accept the tremendous level of responsibility it comes with. For the thirty-plus years I have been serving as a financial advisor, I’ve always said that I only cared about three things when it came to a client’s experience:
- I want them to sleep well at night,
- I want them to meet their financial goals and,
- I want them to be glad they met us.
While investment planning is undoubtedly a core competency for wealth advisors, it's essential to recognize that your responsibility extends far beyond optimizing portfolios. Your clients' families rely on you to help them navigate life's uncertainties and to ensure financial security. Estate planning and life insurance are cornerstones of this responsibility, providing a safety net that can offer peace of mind during challenging times.
Suppose you’re an advisor who prioritizes delivering an exceptional client experience. In that case, it behooves you to gain a sound understanding of total wealth management: comprehensive estate planning, the role of life insurance, and how technology can empower you to provide superior support in safeguarding the economic safety of your clients' families.
Building the bridges to financial safety
The key to understanding your clients’ goals is understanding their deepest wishes for their families. At its core, estate planning involves crafting a blueprint for the distribution of assets, guardianship of dependents, and the execution of healthcare decisions in case of incapacitation. Advising and guiding your clients through ongoing estate planning conversations yields a deeper connection to their entire family. Properly drafted estate planning documents, such as wills, trusts, and powers of attorney, ensure your client's wishes are honored and their loved ones are financially protected.
Life insurance is a crucial bridge that can help survivors maintain their lifestyle and meet financial goals in the event of a premature death. Whether funding a child's education, covering wedding expenses, or providing sufficient cash flow to support a partner/spouse, life insurance can make a substantial difference when a family’s current financial circumstances do not provide enough liquidity to maintain their lifestyle.
Determining the appropriate amount of life insurance can be challenging. The "33X Rule" provides a useful guideline. Families should aim to have approximately 33 times their annual after-tax cash flow needs in a diversified, liquid portfolio and enough cash to cover known expenses like debt pay-off and education costs. This calculation is rooted in robust financial planning methodologies, including Monte Carlo simulation.
Elevating your practice with technology
Today, powerful and easy-to-understand software programs can assist financial advisors in ensuring their clients' estate planning and life insurance needs are met. For example, advisors can use solutions to review existing estate planning documents for gaps and quality, streamlining the process of identifying potential risks and opportunities.
Software tools can help conduct thorough evaluations of a client's estate planning documents, ensuring that wills, trusts, and other legal instruments are up-to-date, comprehensive, and aligned with the client's intentions. By identifying gaps, you can help your clients avoid potential pitfalls that may jeopardize their family's financial security.
Assessing the appropriate amount of life insurance coverage can be a complex task. Technology can simplify this process by performing comprehensive need assessments that examine a client's unique circumstances, goals, and financial position and help recommend suitable coverage that provides optimal protection for their loved ones.
Incorporating cutting-edge solutions into your professional toolkit elevates your capacity to deliver holistic financial strategies and establishes you as a dynamic and resourceful advisor. An efficient, tech-enhanced strategy for managing estates and life insurance showcases your dedication to securing your clients' future prosperity. By embracing technology, you can efficiently review estate planning documents, identify gaps, and perform accurate life insurance needs assessments.
Relieving worry and ensuring a family can meet their financial obligations is fundamental to a financial advisor’s role. As an advisor, your clients seek expert guidance on building and preserving their financial legacy. While investment strategies are undoubtedly crucial, protecting your clients’ loved ones from financial hardship in the face of tragedy also falls on your shoulders.
By embracing technology, you can efficiently review estate planning documents, identify gaps, and perform accurate life insurance needs assessments. By incorporating these crucial elements into your practice, you will be positioned to more effectively shape your clients’ legacies while establishing trust and providing ease of mind for them and their families.
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