Preparing the Heirs for the Assets

Preparing the Heirs for the Assets

An undervalued service for financial advisors? Preparing the client's heirs to receive their wealth.

During his presentation at IMCA’s Advanced Wealth Management Conference in Chicago, Chris Sherman of The Institute For Preparing Heirs in Pasadena, Calif., postulated that advisors to high-net-worth clients should adopt a two-part mantra: Keep the kids as clients, and become a trusted family advisor.

So few advisors are actively attempting to put these plans in motion, he said, either because they have a mistaken belief that this sort of interaction isn’t worth their time or because they’re simply not comfortable initiating such a dialogue. Because of this reticence from advisors, Sheridan maintains that “simply raising awareness” can be a strong differentiator.

While many advisors choose to hang their hats on their prowess in navigating the more technical aspects of generational wealth transfer, such efforts aren’t necessarily in line with the actual needs of high net worth families. Most clients have two priorities when it comes to wealth transfer, keeping both the money and the family intact. “Most transitions fail on the family dynamics prong, not the technicalities of the transfer,” he said.

Indeed, when high-net-worth families are comparing potential advisors, Sheridan doesn’t believe that technical prowess is much of a differentiator. At that level, it’s simply expected. Show an ability to create and maintain relationships with the rest of a client’s family. That doesn't only mean the next generation. Many advisors don’t even have relationships with their clients’ spouses, who are, lest we forget, most often the next in line to end up with the clients’ money.

A lot of the legwork can be done simultaneously. One initial technique he suggests is filling out a client's family tree. Advisors should first try it simply from past conversations and whatever information they can glean from client documents.

Then, invite the client and his spouse to your next scheduled meeting and bring it up. Ask them to help you finish filling it out (showing that you put your own work in first is key), and don’t forget to include family pets. This activity is an easy way to break the ice and beginning talking about the rest of the clients’ family and, eventually, the upcoming wealth transfer, without using intimidating estate-planning language.

It can also help gain some insight into their family dynamic. According to Sheridan, “generally, once you get someone started talking about their kids, it’s tough to get them to stop.” Ideally the parents will begin to discuss the financial transfer topics with their children on their own initiative, which can do some of the work for you.

Then you can start to incorporate the older children into your client meetings and, once you’ve established a broader rapport with more of the family, attempt to organize a family meeting.

Though many of his suggestions are basic and intuitive, Sheridan maintains it’s not the ideas but the effort that’s important, “we spend a whole lot of time preparing assets for heirs, but not so much effort preparing the heirs for the assets.”

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