Delivering better estate planning outcomes for clients

In an earlier article, we looked at why estate planning is in urgent need of a rethink. The big question is how to move forward when there is so much disengagement and misconception surrounding estate planning.

Fortunately, the experts who took part in the Stellar Estate Planning Virtual Summit on money, mortality and the modern family were on hand with practical advice on how to overcome these barriers and deliver better solutions for clients.

As a financial adviser or private client professional, how would you start a conversation about estate planning?

Even though the taboo of discussing financial planning is fading, many clients are reluctant to discuss a subject that comes with reminders of their mortality. Many of you may also be wary of bringing up a topic that can be so fraught with complexity and sensitivity. But with so much of your clients’ finances, legacy plans and hopes for the future at stake, you cannot ignore this elephant in the room indefinitely.

So, to help answer this tricky question, we invited Betsy Butterick, a communications specialist, to speak at our Estate Planning Virtual Summit on Money, Mortality and the Modern Family. Betsy’s advice is to begin the conversation by asking your client about their best holiday ever.

It might sound counterintuitive to talk about the good times when the matters in hand include mortality, inheritance tax and potentially difficult family relationships. But the dopamine inducing trigger of discussing pleasant memories helps to a create a positive rapport and encourage clients to talk openly about their lives and aspirations.

These positive associations can also help you to position estate planning as being about life as well as death. The life affirming benefits could include enabling the client’s children to buy a home for their growing families or helping grandchildren pay for university.

Good to talk

If engagement and understanding are the cornerstones of effective estate planning, Betsy’s key message is the importance of breaking down physical and emotional barriers. Recommendations include coming out from behind the desk and sitting next to clients and their families. This would improve your ability to discuss hopes, dreams and the ways to realise them in an open and friendly environment.

The information gained from these enriched conversations would help you to move beyond one-size-fits-all estate planning to create relevant and customised solutions. You may not be able to deliver all the components in plans that can stretch from business sales, to the legal and financial implications of remarriage and children with different partners.

This is why one of the key takeaways from the Summit is the need for lawyers, accountants, financial advisers and other professionals to come together within a ‘virtual roundtable of advice’. Ideally, the lead ‘curator’ within this collaboration will be the professional with the closest client relationship, who can then bring in other partners as and when needed.

What also came through from the Summit was the importance of opening up the conversation to the wider family. As beneficiaries, the ways the estate plans are structured and managed should ideally take account of their needs and aspirations. In addition to particular financial demands, such as caring for children, family members may want asset allocations to reflect their expectations in areas such as sustainability.

Building the relationships now can also help to ensure that powers of attorney, nursing care funding and other later life plans are in place ready to go if and when needed.

The factors underpinning this informed and customised approach to estate planning are transparency and trust. The reputation of financial services has suffered in recent decades. In particular, clients may feel that the seller’s interests are being prioritised more so than their own interests in what they are being recommended and sold.

Within estate planning specifically, particular concerns centre on suitability, fee structures and the distribution of asset returns. Speaking at the Summit, Andy Agathangelou, who heads the Transparency Task Force, highlighted the importance of consistently acting in the client’s interests in not only winning back trust, but also building loyalty and sustainable revenues.

Challenging assumptions

In looking beyond one-size-fits-all estate planning, the Summit went on to challenge prevailing assumptions about where money should go and how it is managed. In particular, many clients are advised to put their wealth into trust. However, they still have to wait seven years before the money held in trusts is free from inheritance tax. They also lose control of their funds and the investment returns.

Business Relief offers a potentially valuable but still under-utilised alternative. Qualifying assets are free from inheritance tax after only two years. Clients can also retain control and benefit from the returns generated.

Business Relief can be deployed alongside the setting up of a family-owned holding company to manage the assets. This can then be passed down to sons or daughters much like any other family enterprise. This is also a valuable opportunity for advisers and private client professionals to develop relationships with the next generations of the family.

The other assumptions that may need rethinking relate to accumulation and decumulation. In the past, people steadily accumulated wealth through property purchases, pension savings and other investments. As they reached retirement, they would often downsize their homes and switch accumulating investments into lower risk, more liquid funds ready for draw down.

However, thanks to the growth in property and other asset prices in recent decades, many people have more wealth than they can possibly need in later life. This surplus wealth will eventually be passed on as part of the expected £5.5 trillion wealth transfer from one generation to another over the next 25 years.

If your clients do not need all of their accumulated wealth to live on in later life, it would make sense to keep the surplus in higher risk and reward accumulative investments that can be benefit their children.

The priorities in this new investment lifecycle are enabling clients to determine how much wealth they need to draw on in the remainder of their life on the one side and what can be invested for their beneficiaries on the other. This is turn reinforces the importance of engaging with beneficiaries as part of a multigenerational financial plan.

See the Summit for yourself

Coming away from the Summit, it is clear that change within estate planning is gathering pace. As financial advisers and private client professionals, you can all play a key part in engaging clients, challenging assumptions and delivering better outcomes.

If you would like to discuss any of the issues outlined here or know more about how Stellar Asset Management can help you to deliver great estate planning for your clients, please contact a member of the team on 020 3195 3500 or contact enquiries@stellar-am.com.

Important Information

Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.

Stellar Asset Management Limited of Kendal House, 1 Conduit Street, London W1S 2XA is authorised and regulated by the Financial Conduct Authority.