Advisor’s Challenge: A Triple Legacy

By Mark E. Caner

The short-lived Fox sitcom “The Goodwin Games” offered telling insights into the legacies that clients can pass to their children. The story centered on three estranged siblings who discover their recently deceased father has left a large fortune to the winner of an elaborate series of challenges (the “Goodwin Games”) of the father’s devising. The series, however, was about more than the money. It was about the values patriarch Benjamin Goodwin sought to impart to the children after his death - lessons that he had not conveyed in life.

Without question, knowledge and values are best conveyed to children during a parent’s lifetime. The problem is that, too often, parents struggle to do so. That creates an added opportunity for the financial professional who is attuned to serve the broader range of wealth-related needs holistically.

Financial professionals can play an important role in helping clients safeguard and ultimately distribute assets. Doing so, however, addresses just one aspect of a legacy. Beyond wealth that is to be passed to succeeding generations, advisors can help clients pass accompanying ethical values as well, and do so without producing a sitcom - or a drama.

Have you recognized this planning opportunity? Don’t assume your clients haven’t considered it already. In a recent U.S. Trust survey of high net worth individuals, 65 percent of respondents said they would rather their children be charitable than wealthy. The survey also found that only about 40 percent of respondents agreed strongly that their children were well-prepared to handle an inheritance.

Inadequate planning, miscommunication and mismanagement may jeopardize generational wealth transfer. As a result, the fruits of a lifetime’s labor may dissipate within a generation or two.

“Almost all adult children select a new advisor once they receive an inheritance from their parent,” observed a recent article aimed at financial professionals. Despite this, only 34 percent of financial professionals proactively work to build relationships with the children of existing clients, according to The Financial Planning Association’s 2014 Trends in Client Communication Study.” Addressing this disconnect is essential if financial professionals are to serve multiple generations. Cultivating a relationship positions the financial professional to assist in conveying family knowledge and values to their clients’ children.

Building the second part of the legacy -- sharing personal lessons and values as well as assets -- begins with gaining historical and emotional perspective. Thorough fact-finding allows clients the opportunity to discuss what is meaningful to them and, from there, commence building and conveying the financial architecture. Family meetings with the financial professional can be a productive way to share important information about financial values as well as future wealth transfer intentions. When possible, a private, comfortable and familiar setting will help facilitate interaction, as opposed to discussions conducted formally around an office desk. The financial professional can present various considerations about charitable giving, inheritance and other financial issues, for example, allowing the parents to explain how these legacy-building decisions were made and the values behind them.

This interaction is all about sharing, educating and relationship building. Parents may want to recount stories that demonstrate their values and how they impacted their financial decisions throughout life. It is important to involve the children as part of the discussion, regardless of their age. Encourage them to ask questions and perhaps share stories about their allowance, their first after-school job or other relevant experiences and what they learned from them. The financial professional is there for financial expertise but also plays a key role in enabling purposeful conversation. Having an outline or agenda with important areas to cover and key points for the financial professional and the parents to make will prove particularly helpful.

It is helpful for future heirs to witness the strength of the consultative relationship between their parents and the financial professional. Such meetings provide the opportunity to expand the relationship to the heirs-to-be. Some financial professionals then proceed to encourage the adult children to consider them as a resource for information on retirement, insurance and other financial matters. Others include the next generation in the annual review meeting to discuss financial issues, answer related questions and further broaden the relationship. Some invite clients’ children to special client events. Making these connections and nurturing the resulting relationships are critical, even when adult children live at a distance.

Financial professionals can encourage their clients in other activities that can pass on their values. These include producing a video with thoughts to share with future generations; creating a PowerPoint with family pictures, text, voiceover or music; assembling a shareable digital scrapbook; preparing a family history which can be multi-generational or simply personal memories, or writing a legacy letter. There are numerous tools and resources available to support these activities.

Another avenue some financial professionals pursue is to provide educational opportunities for their clients’ children and grandchildren. Some have casual one-hour “lunch and learn” sessions on financial topics such as budgeting, insurance, retirement planning and other issues. These can also be geared to specific demographics such as financial issues for first-time parents, college funding options, retirement plan rollovers for job changers and similar topics. For those who are younger, financial professionals can search online for “teaching children about money” and provide their clients with a wealth of resources that are educational and appropriate for a variety of ages.

All these activities strengthen the consultative relationship between financial professional and client as well as establish the foundation for a third legacy: a relationship bridge to the next generation.

Mark E. Caner, AEP, ChFC, CLU, CFP, is president of W&S Financial Group Distributors. Mark may be contacted at mark.caner@innfeedback.com.