When it comes to estate planning, we see most advisors playing not to lose, as opposed to playing to win. They are committed to staying in their comfort zone: preparing assets for families, as opposed to preparing families for assets.
To navigate sensitive conversations about estate planning, it’s not enough for advisors to have the training; they also need people skills. Some assume that once an estate plan is written, a family doesn’t need further discussion about its goals. But in today’s competitive environment of rapid technical advancements, advisors who play it safe could either lose clients or lose access to the next generation.
There’s a lot at stake. Cerulli Associates says that the baby boomers could pass $68 trillion to the next generation in the next quarter century.
If you aren’t asking the right questions, someone else is. So how do you build enough trust that you can ask more meaningful questions and build a broader value proposition? Reverse the question. How do you ask the more meaningful questions that will allow you to build trust? By meaningful questions, I mean the ones that address the families’ central concerns—for example, “To what extent will your wealth unify or divide your family?”
The Role Of Family Dynamics In Building Trust
Family dynamics play a much greater role in successful estate transfers than people realize. Parents worry about the impact of money on their heirs and how to prepare them for the transfer of wealth. One of the things families fail to discuss is what their values are. A survey of affluent Americans by U.S. Trust suggests they worry about the effect money has on their heirs—a majority worry that the next generation will emphasize material items, spend beyond their means or lose motivation when handed wealth.
There are other things people don’t talk about when they are preparing families for passing on assets. For instance, only 30% of family businesses survive into the second generation, according to the Family Business Institute. In other words, the family loses control of the assets in 70% of their businesses. In many cases, that happens because there’s a lack of communication among family members. Our firm, the Williams Group, works with an attorney who says, “I have been writing estate plans and trusts for many years and have learned that I cannot write an estate plan that fixes your kids.”
The good news is that advisors can fill these gaps in communication and play pivotal roles strengthening the bonds among family members. They do it by asking difficult and important questions about potential problems before the problems actually become divisive.
A lot of those problems will revolve around the family’s expectations. Heirs often lament that something they expected or that their parents wanted didn’t happen.
Our firm sponsors educational programs helping advisors build deeper relationships with their clients. One advisor in our program said, “Trust isn’t built with checklists or playing it safe. We have to get out of our comfort zone and show our team how to get our clients to open up.”
Questions To Build Trust Quickly
Here are some questions you can ask to start more meaningful conversations with your clients:
1. Have you told the family about your estate? What is your concern about telling them?
2. How do you expect wealth to affect your kids? To what extent do you think they see it the same way?
3. What relationship issues could surface when your estate transfers? What type of action are you taking now to deal with that?
4. What is the purpose of your wealth? To what extent is everyone else on the same page?
5. What are the potential sources of distrust you can anticipate when you are no longer here to manage them?
6. The skills that you used to build wealth will not be the same ones you need to give it away. What are you doing to ensure that your family is able to make decisions without you?
7. What do you see as the biggest risk to transferring your wealth smoothly?
Some advisors say they are uncomfortable asking these questions because they don’t want to get into emotional conversations or they don’t know what to do with the responses.