Generational Continuity may offer a way to move emotion-bound clients forward.
My clients want to live long and well, but
ultimately have something meaningful to pass onto their heirs. This
value system forms the cornerstone for our practice of Generational
Continuity. Simply stated, it is an uninterrupted financial connection
We developed Generational Continuity in response to situations that I saw repeated many times over the years: I would participate in planning scenarios and create a financial plan to address estate planning issues that clients acknowledged deserved attention and action. But all too often, clients did not take the steps necessary to execute their plan. Sometimes the process broke down in the early stages when the client was required to make decisions regarding trustees, bequests or disposition of assets. Sometimes the planning got to the stage of having the initial draft of documents created, only to remain unsigned.
I needed to understand why, if clients were acknowledging a problem and advisors were recommending solutions, was the process breaking down?
According to the Worth-Harrison Taylor study (Worth magazine, November 2005) on the status of wealth in America, 166 of the survey respondents founded their own businesses, but only 50% of them say they have a well-defined succession plan for their company in the event of death or injury, and only 30% say they have clearly communicated that plan to their family members. On the family estate planning side, only 70% of the respondents report having an up-to-date, professionally devised estate plan.
These results came from two-hour, face-to-face interviews with 500 individuals from across the country. All have at least $5 million in net worth, and 20% have more than $20 million. Imagine what the results would look like if the survey had been conducted in "middle America." Practicing financial planners know that many clients recognize the need for some level of estate planning yet fail to engage in or complete the planning process.
It became my quest to identify the common goals that my clients share. Secondly, I had to educate them about potential obstacles to achieving their goals. Finally, I had to motivate them to take action when solutions were presented to reduce or eliminate the obstacles. This was my prime directive as a planner.
When questioned about their values, "taking care of my family" was the self-imposed imperative that I heard expressed repeatedly by clients from every walk of life. This clearly expressed sentiment crossed all socioeconomic lines. The income, occupation, age, race, religion or gender of my clients did not alter this primal, driving desire.
Clients seemed to accept this charge to take care of their family as a responsibility, and did not categorize it as a goal. "Taking care of family" ranked up there with "being a good citizen" or "obeying the law" as an implied duty.
Separating the multiple facets of this self-imposed responsibility becomes the next step for the planner. "Care-giving" can be broken out into many forms, including emotional, physical and financial. Addressing the financial specifics of care-giving forms the foundation of Generational Continuity.
Generational Continuity planning was created to reach clients on a level that is more likely to result in action and resolution of estate planning issues than do traditional approaches. Recognizing roadblocks to implementing estate plans enables the planner to formulate a presentation style that can be more effective.
We created a series of methodologies to address the most frequently encountered obstacles to implementing the estate planning process. The obstacles and Generational Continuity methodologies to address them include:
Clients perceive the estate planning process as overwhelming. A multitude of critical decisions, such as selecting a trustee, naming guardians for minor children, gifting assets, end-of-life decisions such as organ donations, life support, etc., are required and are emotionally charged.
With Generational Continuity planning, a planner prioritizes the decisions required, addressing each one independently and tackling them in the order of least difficult first. Acknowledge there may not be an option that is without concerns. In other words, there is not always a "perfect" solution.
Then create an outline of the topics to be addressed and establish a timeline for completion of each one. Identify the role that each of the professionals (financial planner, attorney, accountant, trust officer and so on) will play, and define what will be required of the client. Dividing up the responsibilities and setting expectations for completion dates reduces the perception of being overwhelmed.
Clients struggle with uncertainty. Future changes in tax laws, life expectancy projections, investment performance, rates of inflation and return, etc., are all hypothetical and may create endless scenarios to consider.
Generational Continuity calls for the planner to start by discussing and agreeing with the client on the assumptions to be used throughout the process. Avoid the tendency to consider multiple hypothetical scenarios. Discuss each person's life expectancy, to be based on mortality tables, family history and lifestyle, and agree on an assumed age for mortality projections.
People procrastinate in the absence of a deadline. Many folks agree that changes in the laws and in family circumstances dictate that they should review and revise their life insurance, wills, trusts, beneficiary designations and other legal documents, but they do not devote the time and energy to initiate the process.
The planner needs to create a sense of urgency by defining consequences for failure to act. For example, calculate potential estate tax liability if no action is taken and compare projected estate tax liability if recommendations are implemented. Other examples include discussion of ultimate disposition of assets without proper documents in place, and review of existing beneficiary designations with potential ramifications if they are not structured right.
Human beings are reluctant to contemplate unpleasant life events-denial is a coping technique. Examples are death, disability, divorce, taxes and loss of independence.
The planner needs to recognizes the emotional impact for clients and acknowledge their fears and concerns. Proceed slowly and with sensitivity; do not bombard the client with statistics (such as the number of people who die without a will in place). Personalize the presentation to include discussion about the client's actual life scenario. Provide "tools" for coping with each concern. Discuss long-term care insurance as a "tool" to address fears associated with depletion of assets and being a burden on family. Talk about the benefits each family member would derive from having the coverage in force. Creating a solution to the problem reduces the emotional impact and empowers the client.
Generational Continuity teaches clients to identify their own "BPD" Strategies:
B = Build your wealth and maximize the value of what is left behind for heirs.
P = Protect your wealth to insure that what you've spent a lifetime building isn't eaten away by taxes, inflation or the cost of medical care.
D = Distribute your wealth so that those you love may be taken care of and your assets, and possessions go where you want them to go in the time frame you want it to happen.
Discussing these easily understood generic strategies is the perfect segue into the estate planning process. By doing so, we have just addressed the heart and soul of "taking care of my family" while opening the door to the planning process.
Generational Continuity next introduces the concept of "teamwork." Communicating the importance of working with a team of advisors is only the first step. Quarterbacking the team for the client sets the stage for the beginning of the planning process, and reduces the stress level for the client because they no longer have to worry about aligning themselves with competent advisors with a complementary knowledge base and skill set. All of the parties involved (client, planner, attorney and accountant) benefit from an ongoing team relationship.
In the year 2011, the oldest of the baby boom generation will turn 65 years old. Huge numbers of these folks are in need of some level of estate planning, now and going forward. Overcoming behavioral obstacles to the process may be the greatest challenge that we, as advisors, face. Generational Continuity planning reaches clients on a level that is more likely to result in action and resolution of estate planning issues than traditional approaches. Passing the "Splendid Torch" onto future generations is an admirable goal and one we can be instrumental in accomplishing for our clients.
Ronna Del Valle, CFP, is president of Golden Strategies Financial Group in Pittsburgh.