Advisors need to respect heirs' concerns if they want them as clients.
When Christopher Mogil inherited a sizable trust from his grandmother's estate at age 23, he planned to continue using her financial advisor. He felt he was too young and inexperienced to manage the money himself, and didn't think he had any reason to look elsewhere.
That feeling changed when the financial advisor brushed off Mogil's inquiries about social screening for his investments. "He told me it was out of the question because it would tie his hands too much," recalls Mogil. "He didn't even invite me to his office to discuss the matter, and acted condescending and unresponsive."
A few months later, Mogil switched to another professional who agreed to work with him on social screening for his portfolio, and who spoke with him regularly about his investments and financial goals. The advisor even took Mogil on a tour of one of the companies he invested in. "My advice for financial advisors who want to preserve a relationship with an inheritor is to remember that this is not the same relationship you had with the client who passed away," he says.
That piece of advice may be one that financial advisors would do well to heed in years to come as aging clients pass their estates along in increasing numbers to children, grandchildren, spouses or other family members. While no hard numbers point to an increase in client deaths in recent years, demographic trends and anecdotal evidence suggest that financial advisors will need to deal with them more frequently in the future.
"I've been in this business for 35 years, and up until a year ago we had only two client deaths," says Barry Freedman, principal at Freedman Financial Associates in Peabody, Mass. "Last year, we had ten. I suspect we'll encounter this issue more as our client base gets older."
Just before an interview for this story, Jim Budros, principal at Budros & Ruhlin in Columbus, Ohio, held a meeting with a client couple who just lost one of their mothers. "As we get older we tend to attract older clients, so I suppose we'll be facing this more and more," says Budros, now in his mid-fifties.
Several key issues and responsibilities come to the forefront for financial advisors coping with client mortality. When a death appears imminent, they may work with attorneys to change title to assets and assist with strategies for putting the final touches on the estate plan. Following the death of a client, responsibilities range from valuing assets to sending flowers to helping a spouse obtain Social Security survivor's benefits. (See the attached article for a checklist of some duties financial advisors typically perform.)
Alexander Bove, a Boston attorney specializing in trusts and estates, points to the important role a financial advisor plays immediately following a death. "Once we draw up an estate plan, we may not talk to someone for years," he says. "A financial advisor usually knows someone's financial situation far better than we do because they communicated with that person on a regular basis."
That knowledge, he says, expedites the process of settling an estate. "If someone has not used a financial advisor, legal fees are usually higher because our office has to do more legwork," he says.
Connecting with Family Members
Following the rush of immediate post-death paperwork and activity, the focus shifts to establishing and preserving a relationship with inheritors. While inheritor attrition is sometimes inevitable, financial advisors say that establishing a relationship with family members while a client is still alive encourages them to stay put after a death.
To establish that connection, Barry Freedman offers periodic family financial forums where he invites clients, their parents and their adult children to discusses inter-generational financial planning issues. And he insists on having both spouses present for most client meetings. "If I never see one spouse, I ask the client why," he says. "I've given away a few clients who strained the relationship by refusing to share financial responsibility with a spouse."
Getting both spouses involved also makes it easier for the survivor to handle financial matters and for the advisor to spend less time bringing him or her up to speed. "I once worked with a widow who had to be taught from scratch how to write a check," says Freedman. "Dealing with a spouse who has been kept in the dark about finances can be very, very difficult."
Arranging meetings with adult children may prove more difficult. Geographic constraints, as well as the emotionally charged nature of revealing the details of parental finances, impose formidable barriers. "We encourage clients to bring their adult children to meetings, but that often doesn't happen because they live far away," says Edward Stuart, an advisor at Regent Atlantic Capital LLC, in Chatham, N.J. "Practically speaking, people prefer to deal with someone locally."
Stuart estimates that only about one-fifth of the firm's clients feel comfortable about having their children present at meetings. "Older clients in their seventies or eighties are usually more open to the idea because they are more willing to acknowledge their own mortality," says Stuart. "They may also have come to depend on their children more than recent retirees, so they feel less uncomfortable about sharing personal information with them."
Budros concurs that older clients are more likely to discuss intergenerational financial issues. "A recently retired couple in their early sixties almost never agrees to it," he observes.