1. Take Action in the Zone
Wealth transfer considerations must be addressed as early as pre-retirement and stretching through the client’s sunset years. This period is referred to as the Wealth Transfer Zone.
2. Embrace a Multidisciplinary Approach
An efficient wealth transfer plan is the result of a comprehensive and multidisciplinary approach of protecting and preserving wealth throughout a client’s life. It also includes a series of proactive steps designed to ensure the smooth transfer of wealth on death. The complex issues that often arise throughout the Wealth Transfer Zone call for multidisciplinary expertise including: generational planning, wealth preservation strategies, business and family governance, elder and health care, financial education, college funding strategies, attorney and accountancy engagement, governance document creation and oversight and family counseling. The ability to coordinate these disciplines and implement recommendations is a new planning discipline called “Wealth Transfer Planning and Advising.”
3. Focus on Family and Values
Wealth Transfer Planning and Advising embraces a discovery process that explores and appreciates family dynamics and leads to an understanding of the value and role money plays in life and legacy goals. Effective Wealth Transfer Planning and Advising must also include proactive steps to prepare the next generation to become stewards of inherited wealth.
4. Use Every Tool in an Expanded Toolbox
As affluent clients mature, financial and family-dynamic complexities generally increase as well, and a solution may not lie in the development of estate planning documents. While these artifacts and practices are critical to wealth transfer, there are other, equally important activities that need to happen. Advisors can provide enormous value by coaching on the potential pitfalls, offering guidance on estate administration roles and responsibilities and the importance of having the right team of professionals in place to implement their plan. Advisors can also help clients to consolidate accounts, encourage the creation and development of governing documents and ensure all underlying assets align with the client’s goals and time horizons.
5. Adopt an Inclusive Approach
Whether staunch advocates or harsh critics, heirs and centers of influence (COI) often play a significant role in shaping a client’s opinion. By including these influential people in the planning phase, the advisor can create goodwill while offering an environment of transparency that typically results in a better plan. An inclusive approach also offers the advisor a unique opportunity to form new relationships.
6. Expand the Referral Network
Given the complexity and range of concerns faced in the Wealth Transfer Zone, advisors must develop a strong referral network of professionals, ranging from corporate trustees and estate and tax attorneys to elder care specialists and family counselors.
7. Look for Triggering Events
Advisors must identify activities or developments in either the client’s life or their heirs that could require plan adjustments. Wealth transfer trigger events could include anything from retirement to the arrival of grandchildren, to divorce or death of a spouse. Triggers can be identified when the advisor is in regular contact and conducting in-depth discovery throughout the Wealth Transfer Zone. While clients typically articulate “expressed needs”, the advisor must use a prescriptive client discovery process to surface “unexpressed needs” as well. An example of an unexpressed need is if a client has misgivings about the stability of her son’s marriage. If the advisor is unable to get her to share that concern, she may lose the opportunity to prevent her legacy from evaporating in a future divorce settlement.
8. Socialize the Plan
Communication and trust far outweigh technical planning and investment related issues as top predictors of wealth transfer success. By socializing the plan with clients’ family members and COIs, the advisor can test the plan, establish expectations and measure reactions. The socialization process can bring potential problems to the surface so they can be addressed early and, thereby, help to manage any potential risk that could result after the client’s death. It also presents advisors with the opportunity to build relationships with heirs and COIs who could also serve as referral sources.
9. Serve in the Time of Need
Advisors who work diligently to advise and coach clients through the Wealth Transfer Zone are best positioned to serve in time of need. As a client’s physical activity and mental capacity declines, heirs may need assistance as they assume caregiving and support roles. When the client passes away, the family may need a guide to navigate the estate settlement process. The advisor’s service during difficult times may influence how the family engages the advisor moving ahead.
10. Cultivate New Relationships
Advisors who have performed well in meeting the expressed and unexpressed needs of mature affluent clients are well-positioned to engage in relationships with the adult beneficiaries. They have established real and credible foundations on which to build. Often, the heirs will be in their prime earning years when their parents pass away. If the advisor has not yet developed rapport and trust, a later attempt at building a relationship may be awkward and ill-received. When cultivating a client relationship with an heir, advisors should consider strategies that build a foundation for the long-term.