In our experience working with successful female clients, we find they are focused on one question above all others: Whats the plan? Monthly or even annual portfolio performance doesnt matter much to these clients unless they can see how it fits within the context of their overarching plan and how it gets them closer to their goals.
Yet as the professional and personal choices available to women continue to expand, more female investors are realizing that one crucial section of their overall financial road map remains hazy: namely, their estate plans.
Whats behind this disconnect? Many of our female clients pride themselves on controlling their own destinies and making their own choices; to say these investors are fiercely independent would be an understatement. In many cases, that means they have priorities in their lives other than marriage and children.
So when it comes to estate planning, advisors who hope to serve clients in this growing segment of the market need the expertise and flexibility to help develop a plan that accounts for the unique course each female investor chooses to pursue.
In simple terms, single female clients who do not have children frequently have other people in their lives who are just as important. There may be a boyfriend or partner, nieces and nephews or other vital relationships.
Often, they want to ensure that assets can be smoothly transferred to these beneficiaries. But doing so can be very tricky, requiring careful drafting and thoughtful attention to the clients family dynamics and portfolio of assets.
Unless they are practicing lawyers themselves, many advisors think of estate planning largely as a process to be outsourced to their partners in the legal field. But we get more involved in this crucial aspect of clients financial game plans, in order to ensure that each clients unique needs are addressed and we suggest that other planners do the same.
Here are a few of the steps we use:
1. Attend clients estate planning meetings with attorneys.
On the surface, attending a meeting filled with arcane legal terminology may seem like a poor use of time for an advisor especially one who is initially unfamiliar with estate planning concerns and may not be able to contribute much to the discussion.
In our experience, though, these meetings are extremely valuable for a number of reasons. Of course, theyre highly informative about the estate planning process in general, and can also help advisors learn more about their clients family dynamics. These meetings also let advisors understand clients planning concerns on a more detailed level; and they facilitate stronger relationships with estate planning attorneys.
In some cases, these meetings can even serve as a great way to establish connections with clients beneficiaries. Even if the advisor does not meet the beneficiaries directly, developing a deeper knowledge of a clients plan can enable the advisor to position himself or herself as a tremendous resource for the next generation.
In our case, we are fortunate to have the legal background to handle the drafting of clients estate plans internally. We are frequently amazed at the amount of new information that comes to light during estate planning meetings, even for clients with whom we have worked for many years.
2. Know the basics of each clients plan.
For advisors who are just learning about estate planning, there are a number of educational options available to help with the basics. In our case, we have benefited tremendously from the estate planning component of First Allied University, a professional education program conducted twice a year by our broker-dealer, First Allied Securities, in conjunction with the consulting company Cannon Financial Institute.
Advisors should also maintain close contact with their clients lawyers. At a minimum, advisors should make sure they have contact with their clients estate planning attorneys as frequently as possible to ensure the clients unique needs are being addressed. The advisor needs to know such crucial details as the names of beneficiaries and trustees.
Keep in mind as well that some single female clients who do not have children may need guidance in designating a trustee, since this role is generally served by a spouse or a child. Advisors, with their strong personal knowledge of the client, are often in a great position to help identify the right person to designate for this role.
3. Use your expertise to develop creative solutions.
Even advisors with limited estate planning experience may find that their expertise in other areas helps them add value in this process.
In one case we encountered, a successful female executive wanted to ensure that her boyfriend of 10 years would be provided for when she passed away. The couple were not interested in getting married; at the same time, however, she was concerned that leaving assets to him directly would cause conflict between him and her family after she was gone.
Leveraging our knowledge of the insurance market, we were able to secure a significant life insurance policy for her, with her boyfriend as the designated beneficiary. This solution allowed her to leave her existing assets to her family members and limit potential conflicts down the road.
4. Understand options for charitable contributions.
Many female investors not only want to provide for their loved ones, but also have significant charitable intentions. This can introduce a new layer of complexity to the planning process, since there are numerous structures for accomplishing such a transfer.
For female clients who want an income stream from their assets, a charitable remainder trust may be a compelling option, as this structure provides a partial tax deduction on gifts to a trust with a charity as the designated beneficiary in exchange for an income interest.
For clients who dont need the ongoing cash flow, a donor-advised fund or even an outright gift may be the best solution.
When working on any estate plan, of course, advisors should be aware that state laws may vary. For planners with clients in multiple states, it is crucial to have a basic understanding of the key ways these legal frameworks vary from one state to the next.
Female clients want to ensure that their freedom to control their own destinies does not eventually lead to ambiguity or confusion in their estate plans, which could cause conflict among their loved ones when they die.
Advisors who can help bring clarity to this vital piece of female clients overall financial plans will be much better positioned to benefit from the increasing prevalence of women investors going forward.
Christine Tang, CFP, CWS, and Anh Tran, J.D., CWS, are co-founders of Modern Wealth Advisors, an independent wealth management firm in Irvine, Calif., and associated with First Allied Securities.
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