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Legacy Planning Takes Center Stage for Boomers

By Thomas Coyle April 17, 2015

In a study released last week, J.D. Power and Associates identified financial advisors’ neglect of wealth-transfer issues as a major client complaint. And while advisors tell FA-IQ they understand their peers’ reluctance to tackle such matters head-on, they view it as vital in terms of client service and business development.

“It can be a difficult conversation to have,” especially with clients a decade or more short of retirement, says Travis Russell of Glassman Wealth Services, an RIA in McLean, Va., that manages around $800 million. “It can take some proactive conversation, but when you do get the dialogue going, it’s amazing how they open up.”

Perhaps that’s because, however daunting it may be to start discussing matters of infirmity and death, it’s a topic clients know they have to tackle. The J.D. Power report says 71% of full-service-brokerage customers want to discuss their wealth-transfer needs with their FA, but only 42% say their advisors have even broached the topic. When advisors do ask about clients’ legacy goals, the market-research firm says clients are significantly more satisfied.

That’s an aid to business development for several reasons. For one thing, satisfied clients are more likely to stick around and to make referrals. In addition, attention to wealth transfer can cement ties to the next generation. But it’s also a matter of honing skills that are suited to the times. In a 2012 report, Accenture said advice firms need to gear up for a $30 trillion shift in financial and non-financial assets through the middle of this century — a flow that, at its peak between 2031 and 2045, will see about 10% of total U.S. wealth in new hands every five years. For Accenture, this makes wealth transfer “a defining issue for the wealth-management industry.”

Jason Lina

That’s one reason it’s at the heart of advisor Jason Lina’s work at Resource Planning Group, an RIA in Atlanta with about $230 million under management. In his opinion, it’s an aspect of holistic advice that “should be done for every client, regardless of asset size.” In other words, it isn’t simply a tax issue for the ultra-rich but a matter of good governance across all wealth tiers. “It’s a matter,” says Lina, “of ensuring assets go to the appropriate place — family member or charity — and not, by default, to the state.”

Still, Lina says his firm’s habit of asking new clients to show up with copies of their wills, powers of attorney and medical directives takes some by surprise — “especially if they’ve come to us from other firms.”

At Odds With Transactions

There’s a good reason for that, says Rick Harig of Legacy Resources, a Northbrook, Ill.-based consultancy to advisors and wealthy families. At most firms — and this may speak to J.D. Power’s findings — the emphasis is on transactions instead of planning. In such environments, says Harig, talk of wealth transfer “muddies the water,” even where there are in-house resources to address the topic. And that’s why — to his benefit — FAs who want to help clients with legacy planning are more inclined to outsource the work than take it on themselves.

However it gets done, incorporating wealth-transfer considerations is a crucial part of sound financial planning, according to Russell of Glassman Wealth Services. “You need to have an open dialogue with clients around estate and retirement planning, as well as their investments, insurance and real estate,” he says. “The advisor can’t give proper advice without it.”