Vanilla
May 19, 2020
Financial Advisors: Start talking to your clients about death
Thanks to recent technological advances, basic investment management doesn’t cut it for your clients anymore.
You’re expected to deliver something technology cannot — a three-dimensional view of your clients’ finances, life and death included. Talking about what happens to one’s financial legacy upon death is an emotional conversation. It requires trust, and it requires humanity.
If you can manage to have that conversation, your clients might learn that their investment returns aren’t necessarily worth much to their family without proper estate planning. People who pass away without properly planning their estate leave their family susceptible to years of legal hassle. As their advisor, you’re one of the few people who can sit them down and explain what needs to be done to avoid that.
If you want to level up your business and gain an edge with estate planning techniques and technology, focusing on the human side of estate planning is crucial.
Here’s how.
Break through barriers to preserve legacies
With the recent coronavirus pandemic, the fragility of life is on the minds of Americans everywhere. However, almost 60% of adults lack the core legal documents needed for estate planning, such as a will or a living trust.
For most Americans, that means their entire estate will be handed over to family members as determined by the state government when they pass away. Is this what your clients want? Or are they simply avoiding the discussion around estate planning altogether?
‘When speaking to Caring, Texas finance coach Craig Dacy said, ‘I think many Americans avoid setting up a will because they simply don’t want to think about their death.’
It’s a natural aversion. On top of that, clients are charged legal fees and face a cumbersome planning process, often involving multiple strangers in addition to their estate planning attorney. Estate planning documents typically cost $3,000 – $5,000 in legal fees, often even more in some U.S. markets like California.
The person your client wants to discuss their finances with is you, nobody else. Estate planning is a personal subject, and a family’s trusted advisor typically knows their wishes better than any outside party.
The importance of estate planning
Estate planning can help your clients avoid undesirable situations, like getting bogged down in the probate process or leaving unanswered questions about their medical care.
Probate is the court process that is initiated to transfer assets when someone dies either with or without a will. In many states, probate is a long, expensive proceeding in which the government settles a deceased person’s estate for them using an appointed executor. The executor identifies and takes control of the deceased’s assets, sells assets to pay off any debts, and racks up costly fees in the meantime. In the end, very little may be left for the heirs to take over.
Here’s what you should know about probate:
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The probate process can take anywhere from six months to several years.
Assets are usually frozen in the meantime, meaning your clients’ heirs won’t have access (or have limited access) to anything left to them until it’s over.
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Probate can be emotionally difficult and expensive.
Having the government dig through a family’s finances after a loss is hard enough. On top of that, probate typically consumes between 3% – 7% of the value of an estate in fees, taking a major chunk out of your clients’ legacies.
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Probate often leaves multiple parties unsatisfied in the end.
At the end of the day, the government won’t know what your clients may have considered fair, and their family members will be given a portion of the estate that may not be appropriate to your clients’ true wishes.
Help your clients avoid probate with the proper estate planning documents, such as a living trust, and by directing them to name beneficiaries on their retirement accounts and life insurance policies.
Of course, estate planning isn’t just about avoiding probate.
If your client grants a medical power of attorney to a family member, that family member becomes a proxy for healthcare decisions when their loved one, your client, is unable to make them. Medical power of attorney can save families from some very painful situations.
It’s all too common that people are placed into nursing homes or psychiatric hospitals against their will. Sometimes, a client will have strong feelings for or against certain medical treatments, like chemotherapy, or the issue of living on life support. With a medical power of attorney, your client can outline their wishes and legally enable a trusted loved one to carry out those wishes. Thinking ahead can also prevent family disputes about what your client would have wanted in those situations.
Basic estate planning
Basic estate planning includes:
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Trusts
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Wills
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Healthcare directives
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Financial power of attorney
Not every family will benefit from the default outcome of an estate being divided. Some clients won’t understand the need for formal planning unless you talk to them about it, and some of them are simply uncomfortable about the whole concept of estate planning.
Financial advisors need a way to break through the barrier that is keeping your clients from discussing their legacy. What’s needed is a way to demystify, improve, and modernize the estate planning process without making it impersonal.
Don’t fear technology, embrace it
The use of technology has become increasingly common in financial advisory services. For example, advisors use Betterment to automate portfolio management and present their clients with personalized, tax-efficient investment strategies. Of course, investment isn’t the only aspect of our industry being modernized.
In recent years, we’ve seen progress on regulations around the use of electronically signed wills, which have been years in the making. The Uniform Electronic Wills Act (UEWA), or E-Wills Act, is going into effect in 2020. Some states, such as Florida and California, already recognize the validity of e-signatures and wills.
This should come as no surprise. Consumers are increasingly more comfortable around technology, and research shows that 60% of people expect to automate aspects of their finances by 2025. The estate planning industry has been slower than most to ditch outdated paper-based systems, but we’re getting there. In the modern age, where so much of our data is digitized, there’s no reason not to explore technological solutions.
With the right estate planning technology, you can set up your clients with all the legal documents they need in a fraction of the time and for a fraction of the cost that it would otherwise require. This means you get more face time with your clients, developing the relationship they need to be able to trust someone with their family’s future.
Your clients will have a more personalized experience, and they won’t need to include multiple costly sessions with lawyers just to get their documents in order. If you want to learn how Vanilla helps you deliver a better estate planning experience to all of your clients, get in touch.
A trusted resource: Be the advisor your clients really need
Getting more face time with your clients has huge benefits for both parties. Better communication leads to greater understanding between you and your clients, and, in this industry, understanding your clients has proven to yield better financial outcomes. To your clients, you won’t just be the person who goes through paperwork with them. You’ll be the trusted advisor who connects with them personally and gives them real, actionable advice.
This situation has benefits for everyone involved. Clients benefit from:
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Lower costs
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A more straightforward planning process
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More face time with the person they trust with their financial future
Advisors benefit from:
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Extra time to develop their brand and market themselves
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Developing skills in an “automation proof” niche of financial advisory services
In fact, you may even find that you want to specialize in estate planning, filling an unmet need in a market where over half the adult population has avoided the question of their financial legacy entirely. If you can hold space for your clients and gently guide them through this process, they’ll appreciate you all the more for it. And you’ll be in a position to grow your business and your relationships like never before.
Betterment has partnered with Vanilla, an estate planning automation tool not designed to replace you but to help you. Vanilla allows your clients to craft their own documents through legally compliant templates without exposing you to unauthorized practice of law (UPL).
Vanilla’s network of local attorneys will review and verify your client’s estate planning documents during a brief phone consultation. This consultation comes at no cost to you and offers great savings to your clients. The document templates themselves were crafted by some of the industry’s most recognized estate planners. All written Vanilla communications with your client will be handled under your own branding, allowing you to demonstrate added value to your clients during their time of need.
Change the way you serve your clients and schedule a call with our team.
Deliver a better estate planning experience to your clients and prospects alike
This article is for educational purposes only and should not be considered legal advice. If you feel that the information in this article is pertinent to your situation, you may wish to consult a qualified attorney for advice tailored to your circumstances.
Published: May 19, 2020
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