Part 1: The Challenge and the Estate Planning Solution
Zurich’s recent Intergenerational Advice Masterclasses not only brought to advisers deep research, practical solutions and a process to the challenge of becoming the “family adviser”, but they also created a forum where advisers shared their endeavours, successes and failures in the quest to become the central hub in a clients tribe.
In a four part series the dialogue of these Masterclasses is shared, to deliver an increase in the number of Australians seeking financial advice, by tapping into the most powerful institution an adviser can have a positive influence on: the family.
On average, the number of clients that a financial adviser has a family relationship with is, approximately 5% and this position has often been achieved by default[1] . In contrast, advisers who have designed their intergenerational advice solutions, find that 68% of new clients per annum come via referrals from the family circle.[2] This difference is alarming when you consider that:
- A Canadian study shows 39% of adult age children whose parents have a will have not explicitly reviewed it with their parents, and 61% who have deceased parents stated they never discussed it with their parents before they passed away[3] ;
- Only 2% of adult children keep their inheritances with their parents’ financial adviser;[4]
- With the death of their husbands, only 45% of widows keep their assets with the same financial advisers;[5]
- 70% of families fall apart and lose their assets after the transition.[6]
Of these family breakdowns:[7]
- 60%were caused by an internal breakdown of “trust and communication” within the family;
- 25% were caused by a failure to “prepare their heirs”;
- 10% were due to a lack of an agreed-upon “mission” for the family wealth;
- 5% were due to other causes such as failures to file, signing, incorrect interpretation of tax law, etc.
The opportunity that presents is clear and powerful.
Financial advice businesses that can engage clients and assist them and their heirs to discuss, navigate and resolve succession and estate issues by positioning the adviser as the central hub of the process will pro-actively be able to secure the mantle of the trusted family adviser. What businesses are doing to have success in this space includes the development of estate planning capabilities far beyond the minimum that many advisers provide which at its worst involves a cursory paragraph in a statement of advice or a check box in a financial needs analysis.
In the May 2014 Intergenerational Advice Masterclasses, advisers discussed how they were positioning estate planning solutions with their boomer and senior clients.
What was discovered was that components to the success of the strategy included:[8]
- A pitch used with the client to initiate the estate planning conversation that highlighted the opportunities and dangers to the succession intentions;
- A template or set of estate questionnaires to highlight the potential issues for the will maker;
- A relationship with an estate planning specialist solicitor firm OR the facilitation of in-house solicitor services;
- Positioning the adviser in the role of the central facilitator of the estate discussion;
- The adviser offering assessment services to determine the capabilities of beneficiaries, guardians, executors and POA’s with a report and assessment provided to the will maker;
- Upon execution of the estate plan the adviser engages key players in the process (executor, POA’s, beneficiaries) to reiterate the plans and ownership of the facilitation role by the adviser.
These capabilities are being used by advisers successful in the Intergenerational Advice space and are seeing them take the advice process one step further and leapfrogging their competition by connecting with the next generation through preparing heirs to receive and manage wealth. Historically the industry has focused on preparing assets for heirs; these progressive businesses are now begin to offer the other half of that equation – helping prepare heirs for assets.[9]
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[1] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia.
[2] Zurich Australia study of successful family advice businesses 2012-2014.
[3] Accenture Wealth and Asset Management Services, 2012, The Greater Wealth Transfer.
[4] Doolin, Priesser and Williams, 2011, Engaging and Retaining Families, Investment Management Consultants Association.
[5] Doolin, Priesser and Williams, 2011.
[6] Doolin, Priesser and Williams, 2011.
[7] Doolin, Priesser and Williams, 2011.
[8] Insights from Intergenerational Masterclasses, May 2014, Zurich Australia
[9] Doolin, Priesser and Williams, 2011.
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