Estate planning services must move beyond a “nice to have” to an essential part of building and maintaining client relationships for wealth managers, according to speakers at RIA Edge Los Angeles.
During a panel titled “The (not so) Hidden Value of Estate Planning,” experts argued that while estate planning is often referred to as a service in the industry, many advisors still don’t implement it with clients, which can lead to missed business opportunities.
“There’s this common misconception that estate planning isn’t as important,” said Jeremiah Barlow, executive vice president, head of wealth solutions with Mercer Advisors, where he leads a team of in-house estate experts. “We’ve seen the absolute opposite happen when actually engaging with estate planning—you open up opportunities and see where the client’s long-term goals are.”
According to Patrick Schultz, senior wealth planner at Clark Capital Management Group, gaining a broader understanding of the client’s financial picture drives client stickiness and opportunities.
“For us, we have significantly higher retention and significantly higher share of wallet opportunities when we do estate planning,” Schultz said. “It’s something we do from the beginning.”
Ken Lako, president and CEO of Members Trust Company, said financial advisors should not just consider estate planning as a tax mitigation tool. He told the audience to think of estate planning as “relationship insurance,” among the families working on the plan and between the advisor and client.
Regarding relationships between family members, Lako said people “don’t plan appropriately,” noting that “at least 60% of families end up either in court or having some sort of dispute over what that estate’s going to look like.”
Putting a plan together for a client can help mitigate those troubles.
Furthermore, estate planning can help solidify an advisor’s relationship with the next generation of family members who may inherit assets.
“We’ve got one shot at this great wealth transfer we’ve been talking about with tens of trillions of dollars that is going to be changing hands,” he said. “If you’re not at the table talking to your clients about what’s going to happen with those assets, I guarantee you, the assets that you manage are on the menu for somebody else.”
Schultz agreed, noting that one of the most significant causes of client outflows for registered investment advisors is “lack of connection with the next generation.” He said creating an estate plan is a way to connect with that group.
“I usually break it down with them by saying you either have a tax problem, or you don’t, but you all have a legacy problem,” he said. “If you can get a client to understand what their plan is, why it works and engage their children in that plan, you get to know their kids. The money becomes far more sticky and the client’s assets stay—plus, the client’s just happier.”
Panel moderator David Armstrong, director of editorial strategy and operations at WealthManagement.com, noted that financial advisors generally refer estate planning to third-party attorneys, but that approach takes it outside the “continual planning process.”
Panelists agreed that financial advisors shouldn’t be expected to delve into the details of estate planning, but rather should leverage partnerships or in-house expertise to create ongoing estate planning services with clients.
“I think partnership is key,” Schultz said. “That’s the reason why I have a job and why Jeremiah (Barlow) has a job. We are there to provide the team that can compete with wirehouses.”
Schultz said the relationship differs from working with a private practice estate attorney, which is “transactional by nature,” with a one-and-done plan being created and sent to the client.
In contrast, he said, “Our job is to work with the client [to] look at where that planning needs to go, design a plan and work long term.”
Mercer hired Barlow 12 years ago because advisors were “having a hard time getting the estate planning done,” he said.
At that time, clients were often only taking action on estates when there was an event or reason, instead of making it part of their regular financial plan, he said.
Today, Mercer advisors can work with clients on a legacy plan through Barlow or a team of about 40 experts.
“It’s not just about planning for when you die,” he said. “It can also be about if something happens to you and you’re disabled, who’s going to take care of you? And if you don’t put anyone on there, somebody else might step in that you don’t trust. That’s generally enough from a talking point perspective to trigger people to say, ‘Shoot, I should probably think about this.’”
Lako added that with the advent of artificial intelligence, advisors should have more time to focus on client needs and wallet expansion, including estate planning. He admitted that that area of conversation can be more complex as it involves “death and immortality,” which is why some advisors can choose to partner rather than hold those conversations themselves.
“Recent stats say roughly 25% of advisors are actually having in-depth conversations with their clients about their estate planning,” he said. “Compare and contrast that to the number of clients who want a holistic approach, and it’s 90-plus percent. … If [estate planning] is not your bailiwick, so to speak, just find a partner that can help you have this conversation. Because somebody’s having it with them, and you won’t be at the table.”
