3 Ways Advisors Can Better Approach Client Estate Planning

(Forbes) - Financial advisors are uniquely positioned to help their clients overcome the often challenging hurdle of estate planning. In fact, according to the 2022 State of Estate Planning report, advice from a financial advisor is the top driver for creating an estate plan.

Despite this, one survey found that 67% of Americans don’t have an estate plan and many people aren’t actively thinking about discussing it with their advisor as frequently as other, more immediate financial topics: “Should I be thinking about setting up a will or a trust?” quickly takes a back seat to “should I diversify how I bank to make sure my deposits are fully FDIC insured?” or “what do you think about the current market volatility?”

However, just because clients aren’t actively asking about estate planning advice doesn’t mean they don’t expect it. According to research from the Spectrem Group, 93% of clients expect estate planning advice from their financial advisor, while only 22% reported actually receiving it. This gap is too large to ignore. The solution is not for advisors to put off talking to their clients about estate planning. Holistic financial planning is much more beneficial both for advisor and client, and that includes planning for post-life legacy in concrete ways.

Research from SmartAsset shows that “the most popular service that financial advisors plan on adding is estate planning. … Of advisors who plan on expanding their services, more than 60% are looking toward adding estate planning.” Even though many advisors plan to start offering estate planning to their clients, they still face roadblocks:

  • Clients already have plans in place and don’t realize the importance of consistently updating their plans, which is a recipe for unintended, sometimes disastrous, consequences.
  • Referral to attorneys can be complicated and disconnected from the rest of the client’s financial planning.
  • Clients don’t enjoy thinking about death and tend to avoid talking about end-of-life plans, even if they know having a plan would benefit them.

The three following tips can help advisors better approach getting their clients’ estate planning squared away:

1. Use existing goals as a segue to legacy planning.

Advisors often understand their client’s financial goals better than their clients do. Digging deeper into the philosophical why behind your client’s current financial goals—what motivates them to engage your services—can be a natural way to start discussing post-life legacy without focusing on the grim topics of incapacity and death.

For example, imagine one of your client’s main goals is to retire early so they can devote more time to two charitable organizations they really care about. Taking the time to discuss, with genuine curiosity, why they’re passionate about volunteering creates an opportunity to ask whether they envision passing on any money to charity.

2. Research helpful technologies.

Most advisors don’t have time to become trust and estate lawyers and cannot practice law on behalf of their clients; however, clients expect their advisors to introduce them to estate planning solutions and remain the quarterback to the overall planning for their financial well-being. There are approachable educational resources available online for advisors that enable advisors to speak with more authority to their clients about the estate planning process. There are also fintech solutions that directly facilitate the estate planning process, without needing to refer clients to an attorney.

Be diligent when evaluating these options. Many claim to be more legally robust and customized than they truly are; those solutions may not have been designed by attorneys who specialize in trusts and estates or tax laws and may use one-size-fits-all templates. Look into how easily the estate planning technology integrates with your existing business model and how easy the onboarding process makes it for clients to get started. Otherwise, you’ll end up paying for stand-alone software you don’t have time to configure and your clients don’t end up using.

3. Appeal to practicality.

Clients have varying styles of communication and preferences for making decisions. What motivates people to start seriously thinking about estate planning is unique to their personality and life experience. Some clients may be motivated by the thought of leaving a lasting legacy. Others may be motivated by emotional appeals about securing the financial futures of loved ones or reducing family conflicts. Other clients may be more steadfastly practical; they may be primarily concerned about privatizing the estate administration process, ensuring that business continues as usual, or reducing probate and attorneys’ fees or taxes. Talking to those clients directly about the potential consequences of not having an updated estate plan—like what happens when someone dies without a will—might be a more well-received approach. Conversations about estate planning are a great way to solidify an advisor’s position as someone who cares about the full picture and who digs deeper for that meaningful connection.

Mike Sha put it well in his recent Forbes piece, The Missing Piece In Wealthtech May Just Be Humans: “The current disruption in wealthtech is, and will continue to be, about human advisors building a greater number of meaningful relationships. Technology has the potential to significantly decrease administrative tasks and increase the amount of time advisors can spend with clients and find new ones.”

Advisors can also be more effective if they understand their client’s entire estate beyond the capital they get paid to manage. An actionable example is helping clients navigate estate taxes. The federal estate tax is imposed at 40% on any value in excess of the exemption amount, which is currently approximately $26 million for a married couple. However, the estate tax exemption is set to decrease in 2026, and any advisor that doesn’t act prudently regarding estate planning for their clients may be doing a disservice to those with estates above the exemption amount.

When evaluating estate planning options for their clients, advisors should focus on solutions that provide insight and recommendations into estate taxes in addition to legal document drafting. Without estate planning, no financial plan—or advisor-client relationship—is truly complete.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

By Rafael Loureiro | Forbes Councils Member | Forbes Finance Council
July 17, 2023

Rafael is CEO & co-founder of Wealth.com, a financial technology startup modernizing estate planning.


More Articles