Australia is on the verge of the largest intergenerational wealth transfer in history, with $3 trillion expected to be passed on from wealthy Baby Boomers to family members, friends, foundations or charities within the next 10-20 years.
This means that now, more than ever, estate planning presents a huge opportunity for advisers. Through offering estate planning as part of a holistic advisory service, advisers can differentiate themselves in the marketplace, enabling them to grow the size and profitability of their business and enhance engagement with their clients.
Estate-planning: historically outsourced
Common practice in estate planning for many financial advisers involves simply mentioning in the statement of advice that a client ‘should’ have an estate plan in place and sending them to a local solicitor, if the client asks for guidance on a will.
This process may have worked in the past when superannuation, tax and relationships were all a little simpler, but estate planning and financial advice have become more complex and intertwined. This presents a golden opportunity for financial advisers to take the lead, manage the various inter-disciplinary relationships and help steer their client through a complicated, and often emotionally charged process.
Here are four key reasons why estate planning should be an essential element of your advice offering:
It’s an effective client engagement tool
Advisers are always looking for new opportunities to attract and retain clients.
As an adviser, you already have a trusted relationship with your client. This places you in a good position to strengthen that bond through extending your discussions with clients to include their estate planning wishes. When discussing how to build and manage their wealth, seek to broaden the discussion to include how they should protect their wealth and ways they can ensure that it is directed according to their wishes.
‘Shying away’ from discussing estate planning, or handing it over to someone else, removes you from an important opportunity to deepen your relationship with your client. Instead, choosing to add value for your client through discussing their estate planning wishes demonstrates that you have a higher level of care for your client, thereby making you stand-out from other financial advisers who do not.
Additionally, through partnering with a professional trustee company you and your clients will have peace of mind knowing that their affairs will be professionally managed according to their wishes in the event of an accident or illness.
Enhanced revenue opportunities
Estate planning is a complex process, involving the intersection of many financial advice services such as superannuation, insurance, wealth transfer and tax minimisation strategies. Offering this additional service to your clients enables you to increase the range of fees earned for services to a client, thereby building new revenue streams for your business.
Rather than outsourcing estate planning entirely, you should look to partner with a trusted estate planning lawyer who allows you to continue acting as a trusted adviser to your client throughout the estate planning process. By extending your role in this way, you will fulfil an invaluable service to your client through ensuring their wishes are well understood and addressed, and making sure any areas of concern are clearly explained. This also enables you to maintain control over the relationship with your client.
Access to the next generation
Estate planning also provides a valuable opportunity to grow your business to include the next generation through leveraging the trusted relationship between you and your client.
A 2014 study from the US found that advisers continue to manage about 50 per cent of their clients’ assets when they die. This makes sense, as often the surviving partner will already have a relationship with the adviser. However, when the surviving partner also died, the study showed that only 2 per cent of children keep their inheritance with their parents’ financial adviser. This demonstrates the importance of building a relationship with not only your client’s partner, but also their beneficiaries, as it will be the next generation that secures the long-term prosperity of your business.
When discussing estate planning with your client, try to find out as much as possible about the beneficiaries of their estate and, where possible and appropriate, arrange to meet them face-to-face. This can give you an opportunity to build relationships with them and increase the likelihood of securing them as new clients in the future.
Holistic approach to advice
Making estate planning an essential element of your financial advice offering not only generates opportunities for advisers but offers clients a more holistic experience. By integrating estate planning, you can deliver a truly ‘cradle-to-grave’ service that considers not only your client, but their extended family and provides for their future under a range of possibilities.
Ravi Malhotra is head of business development at Australian Executor Trustees
How does “AET’s comprehensive range of tools and products can de-mystify the estate planning process and ensure your clients get the best advice possible” qualify as ‘opinion?’
Full disclosure – I’m not a lawyer, I just know some. Some are even good, decent people. Estate planning is a highly specialised area of legal expertise. I find the idea that someone trying to be a full-time financial adviser and full-time lawyer to be disconcerting to say the least. I also find the premise of the article somewhat hypocritical – it’s ok to outsource the executor role, but the estate planning should be done in-house?
Estate planning, like financial advice, can provide wonderful coaching, guidance and structure to the public. Like trying to ride two horses at once, I just don’t see it being done well by one person. Use a specialist.
Good idea – but for the financial planner/financial adviser before offering such a service make sure that your PI insurance covers this type of conduct, or you could end up with a significant potential liability problem.
“Professional Business Conduct” coverage in most PI insurance policies for financial planners covers the planner’s AFS licence authorisations – financial product advice, dealing and tax (financial) advice – i.e. tax advice related to a financial product or financial service.
Estate planning, including estate planning strategies that go beyond superannuation to include interests in real estate holdings or advice to blended families etc … this can be typically a much broader scope of work. Therefore, if you intend to do more than provide a mere referral of this type of work to lawyers or trustee companies, make sure you have PI insurance cover, and get that confirmation in writing from your broker or insurer.
Remember, if something goes wrong, the financial planner is the ‘soft’ target because of EDR schemes such as FOS. It is much harder for a client to obtain compensation by making a claim against an accountant or lawyer.