There were a lot of unhappy people on the SBS ‘Insight’ program shown on August 2, 2016. The long-running audience discussion show had turned its attention to challenges to wills and the hour was full of emotionally-told stories of the audience’s personal experiences and the anxiety, stress, frustration, anger, resentment and sadness caused when families fight over inheritance.
The sad part was that most of these family tragedies were unnecessary because a well-constructed and properly documented and communicated estate plan could have solved the vast majority of these cases without the need for litigation lawyers.
The very fact that SBS presenter Jenny Brockie and her team thought to turn their gaze onto this subject shows how much it is coming into the public consciousness. And why wouldn’t it be? It has been estimated that the total net worth of Australians over 55 is $3.387 trillion. With most of those people likely to die over the next 30 years that huge amount of money will change hands. The need for advice is enormous.
Will-making, or more properly, estate planning, is increasingly being seen as a vital aspect of a person’s life and of their ability to protect their loved ones. Most people are keen to ensure that they don’t leave their family with a monumental problem that causes deeply-felt family rifts and long-running disappointment. At my firm we say: “Your estate planning isn’t about you, it’s about those you love.”
So much more than a will
Financial advisers have long accepted their role in ensuring that their clients consider their estate planning. But much of that role has been restricted to simply asking the client each year whether they have a will or whether they need to revise their will. Depending on the answer the client could be advised to go back to their solicitor … end of story.
Why have advisers not been more pro-active in their clients’ estate planning? Possibly because they feel they don’t have enough expertise, control or money.
Firstly, although estate planning is part of a financial planner’s education, without regular exposure to it in client dealings, planners quickly forget their estate planning education and lack the confidence to provide advice, particularly in the face of the control and occasional expertise exercised by the client’s solicitor.
That’s the second issue: the adviser, lacking confidence in their ability to add value, simply sends the client to the client’s solicitor and as a result loses control over the whole process. Little wonder that the adviser stresses over whether the client’s financial needs, goals and structures have been properly looked after in their estate planning. Years of careful and considered financial strategy goes down the drain through the use of an inappropriate will.
Remuneration for planners
Finally there’s the issue of money. Advisers, traditionally used to commission payments, have struggled to work out how to earn from providing estate planning services. That’s changing of course, with the move to fee-for-service, but questions persist as to what is the correct fee an adviser could charge, what will they actually do to justify that fee and will the client be convinced that they’ve added the appropriate value?
Does the adviser have to provide estate planning services to the client with little remuneration, simply to meet their moral or legal duty to properly advise their client about the topic? Or can they be properly recompensed and what can they do to justify that fee?
Of course the answer lies in the adviser taking control of the process as much as possible. That can be as little as assisting with the liaison between the client and the person chosen by the adviser to devise and document the estate plan, through to preparing the estate plan and directly ensuring it is documented properly.
Advisers can achieve greater confidence in the field of estate planning by understanding a few important points.
Firstly, everyone needs estate planning. If you’ve had any permanent job at all in the past 20 years you have superannuation and as soon as you have superannuation which can’t be dealt with in the will you have the need for more than just a will: you need an estate plan.
Secondly, don’t let any client tell you they’re going to spend the money before they ‘go’. Ask them simply: “And when will that be precisely?” They can’t know and if there’s an accident out there with their name on it the plan to ‘spend it all’ just failed.
Thirdly, not every client needs massively complicated and expensive estate planning. In fact the 80-20 rule would suggest that 80 per cent of your clients will need only relatively straightforward, moderately priced estate planning.
Fourthly, estate planning is a great way to engage with the client’s kids, and even grandkids sometimes, and become their adviser too.
Fifthly, estate plans often need amendment, so the annual review process becomes important and although actual changes would probably not be an annual event, they help the adviser show how they’re adding value for the client.
Three key areas for planners
So how does the adviser become integral to their clients’ estate planning? Deal with the three areas of concern: take control (including the appointment of the estate planner), increase your estate planning knowledge over time and charge an appropriate fee for what you do.
And by the way: try to avoid simply talking about ‘wills’. If your service is seen simply as arranging a will, the playing field will be filled with low cost operators selling “wills” cheaply or giving them away for nothing as part of some other promotional agenda. The cut-price merchants can’t provide proper estate planning so don’t let them into the park by permitting comparison.
Your service should be much more than simply a will. It should involve the super death benefit nomination (and considerations as to how it will dovetail with the will), perhaps a testamentary discretionary trust and of course ancillary documents like enduring powers of attorney and appointment of enduring guardians.
There is no doubt that every financial adviser should provide their client with an estate planning service, if not because you need to help your clients with this vital area of their financial management, then because if you don’t someone else definitely will.
