The views presented here do not necessarily represent those of Advisor Perspectives.
Today, many clients expect their financial advisor to be involved in the estate planning process — and they’re willing to switch advisors to find one who offers this expertise, according to a July report by digital estate planning platform Trust & Will.
More than half of Americans (61%) said their advisor should offer estate planning, while 68% of advised clients would consider switching to a new advisor, if their current one doesn’t provide these services, the survey of 1,500 U.S. adults found.
A combination of personal and economic factors influenced many respondents’ interest in estate planning. The top events that triggered Americans to more seriously consider estate planning in the past 12 months included: a health diagnosis or medical event (15.5% of respondents said), the death or serious illness of someone close (13.7%) or a job loss or income uncertainty (13.5%), the report found.
More than a quarter of survey respondents (27.4%) said they would prefer to create or update their estate plan with an advisor, while 24.3% said they preferred to do so with an estate planning attorney. Nearly 19% preferred that both be involved.
Consider a Coordinated Team
Scott Bishop, partner and managing director at Presidio Wealth Partners, which offers estate planning services, said that some of the survey findings reinforce what he’s seen in practice.
“Clients increasingly expect their advisor to initiate the estate planning conversation and help keep the plan current,” Bishop said. In his experience, however, few advisors “really work and coordinate the whole planning process — many just chat (with clients) and refer to an attorney.”
While Bishop believes that advisors should educate themselves on estate planning, he does not think advisors should replace qualified legal counsel.
“The best outcome generally comes from the financial advisor, estate attorney, and tax professional working from one coordinated financial and family plan,” he said.
The Advisor’s Role vs An Estate Planning Attorney
Presidio Wealth distinguishes its advisor role as the “architect” and “ongoing coordinator” of the estate plan, helping families to clarify their goals, model lifetime cash flow, evaluate how wealth can best be transferred, plan taxes and distributions, and even identify planning opportunities related to investments, business interests, charitable giving and other financial matters, Bishop said.
“We put together a package for the attorney that talks about their family assets, goals and objectives, and estate planning projections (for major events) and other specific recommendations. We’ve already sent all of that when they first sit with an attorney,” Bishop said.
Often, clients may feel more comfortable working with a financial advisor due to the legalese spoken by attorneys or accounting lingo by tax professionals. Bishop said that some people may be prone to signing documents they don’t fully understand, because they don’t want to appear ignorant regarding their financial affairs.
Trust & Will’s survey noted the top estate planning tasks that Americans wanted their advisor involved in: help with beneficiary designations or tax strategies (40%); education on estate planning basics (35%); a full suite of services, including document drafting (35%); and reminders to update or review their estate plan (33%).
Beyond Lip Service
In the industry, Bishop has seen that estate planning services offered by some advisors can lean towards “a teeny bit of lip service,” which quickly results in them referring clients to an estate planning attorney.
“I would suggest, if someone wants to get into estate planning, consider what software you’ll use for projections, and are you able to give tax planning and legal advice? If you really want to be in this business, get educated in this business, or be around people who are educated in this business,” Bishop said.
A great start is learning the major estate planning laws of your state, he noted. For instance, in Texas where Presidio is based, probate laws are a lot less stringent, making it more simple and less costly to have an independent probate process.
“The same is not true of New York…a lot of people there may arrange their estate to avoid probate there,” Bishop said. Probate is the legal process by which an estate is administered and transferred upon someone’s death under the terms of their will.
A Major Shift on the Horizon
As it pertains to the Great Wealth Transfer — when as much as $124 trillion will change hands to younger generations — nearly half of survey respondents (47.8%) said they felt unprepared for this occurrence. Furthermore, nearly three in four Americans had taken no formal steps to set the stage for this wealth transfer.
Across generations, from Gen Z to Baby Boomers, Gen X felt least prepared for the Great Wealth Transfer, the Trust & Will report found.
“Gen X, sitting in the middle of the transfer and often both inheriting from parents and planning for children, is the least prepared generation: 58.9% are not very or not at all prepared,” the report said.
Read more from Danielle Walker:
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
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The views presented here do not necessarily represent those of Advisor Perspectives.
