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Clients Don’t Need Estate Planning? Pitch Them a “Post-nup”

January 5, 2015

Many financial-advice firms target clients worth between $1 million and $10 million. So it’s no surprise advisors who contend for these low- and mid-tier millionaires “face brutal competition,” as Wall Street Journal columnist Norb Vonnegut puts it. More worryingly, the writer contends, they face questions about the value they create for such customers.

One antidote, Vonnegut suggests, is to recommend “post-nuptial” agreements.

Serving clients with $10 million or less, “you’ll never be able to say, ‘I saved you millions in estate taxes,’ because they simply don’t apply to couples in this bracket,” Vonnegut writes. Further, with the sting of 2008 still pretty fresh, investors are increasingly aware ETFs and robos provide cheaper alternatives to flesh-and-blood investment advisors.

In sum, says Vonnegut, dealing with clients who don’t need estate-planning help makes it “harder to identify those pockets of expertise where you can make a profound impact on the financial health of your clients.”

And that’s where post-nups come in, supposedly. These contracts make provision for dividing property and spousal support “in the event of divorce, death of one of the spouses or breakup of marriage,” according to Wikipedia. In other words, they’re like prenups, only they’re drawn up after wedding vows are exchanged, not before.

Setting aside an obvious objection — namely, that a spouse suggesting the idea risks a stint in the doghouse — Vonnegut says post-nups “can be particularly useful” for couples who have kids from previous marriages and want “to leave assets to their children rather than each other.” The documents also put in writing the couple’s agreement on vital financial matters that can complement an estate plan and prevent legal problems later on. According to Vonnegut, “this kind of unanimity is hugely valuable whether a couple has $1 million or $100 million.”

Further, since post-nups are drawn up by attorneys, not advisors, suggesting these instruments shows you’re looking out for your clients’ interests instead of your own. For building trust, Vonnegut — formerly a Morgan Stanley FA — says “there is nothing like bringing an idea to a family, one where you will never get paid but one that shows you are focused on their unique circumstances.”

It would be fun to hear from our readers on this idea. Is recommending a post-nup really a significant value add? Or is it another reason to think brick-and-mortar financial advisors are going the way of the landline telephone for all but the richest clients?

By Thomas Coyle
  • To read the Wall Street Journal article cited in this story, click here if you have a paid subscription.