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Written by: Linda Eaton and Jeff Cobb | Cannon Financial Institute
Over the course of our long careers in the financial industry, we often come across financial professionals who are primarily focused on revenue generating activities and building their practice. While every savvy financial advisor should be money-driven and have their eyes set on financial growth, they should also focus on other activities that may not necessarily produce immediate profits. However, “delayed gratification” brings many benefits in the long run.
Let us explain. When estate planners work with a client, they should see the WHOLE family as a client – not just an individual. This approach can make a world of difference and help advisors transform their business in the future. We understand how busy every advisor is and how much responsibility they handle daily. There are so many challenges, setbacks and emergencies to address while staying organized and keeping clients happy. That said, building relationships with the client’s family is not just something to consider – it’s a must. In other words, it’s a great way to establish rapport with the next generation, build trust and become indispensable in the future. Guess what: these relationships will eventually evolve into increased earnings, and that’s what every estate planning professional should keep in mind - no matter the workload.
In our experience, clients are often reluctant to reveal information about wealth to their children. And for a good reason. Who knows how it will influence the beneficiaries, their outlook on life, their behavior or work ethic. It may potentially lead to laziness, lack of incentives, low self-esteem and a myriad of other issues. Therefore, the client’s wealth remains shrouded in mystery until the benefactor passes on. It also means that financial advisors typically have limited contact with beneficiaries (if any at all) which may eventually fade overtime. Interestingly, 80% of women who entrust all financial transactions to their husbands, usually turn to another financial planner after their spouse passes away.
What’s important is that the advisor eloquently communicates the value of meeting a beneficiary – and as soon as possible. In addition, the client should understand that the benefits of these interactions are undeniable and can ease the burden for their children when it’s time to take over the estate. Even long-distance relationships should not pose a problem – technology makes it easy to connect no matter where you are. If your clients are based in New Jersey with adult children residing in Costa Rica, communication technologies such as Zoom and Microsoft Teams come to the rescue. No need to jump on a plane or wait for the kids to come home for the holidays. They don’t have to take a long trip, look for your office…or even wear shoes.
Now let’s see how this could benefit the heirs.
They learn how to responsibly manage and handle wealth. Handling estate is not for the faint of heart and can be challenging and overwhelming. By educating beneficiaries about wealth management ahead of time, financial advisors empower them and turn them into stewards of wealth. Simply put, the heirs should be well-equipped to handle their assets and the huge responsibility that comes with it.
Financial advisors should take steps to organize a family meeting and help everyone involved put a solid plan in place. In addition, we would like to stress the importance of building relationships with adolescent children. As they grow and evolve, they start developing all kinds of needs and should learn how to build their credit, manage debit accounts, determine which retirement account to set up or how to pay back student loans.
Sadly, evidence suggests that fewer than 20% of heirs retain their parents’ advisory relationships. There are many reasons for this, but the most common one is that the advisors did not take the time to build relationships with the next generation. That’s why we like to remind financial professionals about the importance of seeing the FAMILY as the client rather than the individual or the couple.
Once advisors shift their mindset and view their service through the family-focused lens, opportunities to establish a connection with heirs abound. Hence, every time a beneficiary or trustee is selected, the advisor has an iron-clad reason to reach out. If wealthier clients are reluctant to share the value of their estate with their heirs, advisors can STILL easily conduct family meetings and one-to-one conversations without revealing actual numbers. Introducing yourself and your team as,” We’re the people to call if something should happen to Mom or Dad…” is a good way to go.
A few words about family meetings
In our opinion, conducting effective family meetings can be an art form. Begin with the original client. If you are primarily dealing with one spouse or partner, start right there. When a client says their partner “isn’t interested,” it usually means they would rather avoid financial jargon or have a lot of other things to worry about. In this case, why don’t you ask, “If something happens to you, how prepared is your partner to take over financially?” Help them envision how difficult it could be for their loved ones to deal with complicated estate matters while grieving.
Once both spouses are on board, focus on the younger generation. If the children are adults and have their own advisors, it should NOT preclude you from reaching out. They not only stand to inherit assets that you already manage but could potentially bring a wealth of additional assets to an advisor who has impressed them by expertly serving their parents.
If the heirs are younger, educating them about wealth management ahead of time can be the gift of a lifetime.
You may focus on the following topics:
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Emergency planning
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What is expected of an executor?
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Estate planning details
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Leveraging charitable contributions/philanthropy (depending on level of wealth)
Final thoughts: Family dynamics can be complicated. Learn as much as you can in advance about potential “landmines”. Remember: a family is much more likely to behave well simply because of your presence which means that you have the power to prevent conflict. Once the agenda is set, share it with everyone involved. There will be outgoing or reserved family members, so encourage everyone to speak up and voice their thoughts, opinions and concerns. Don’t forget to follow up individually with adult heirs.
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