A mess of an estate plan. Then it got worse.
Financial advisors are constantly looking for ways to differentiate themselves to grow their businesses. It’s not easy. Selling yourself through investment management is useless and even providing financial planning is becoming old school.
But there is a way to pull ahead — become known as a financial problem solver. That means getting into the dirt with clients about hard issues related to money. Relationship challenges, career upheaval, illness, aging and death all present opportunities to help clients with the yuck that life sometimes throws their way. And when you are gladly willing to deal with the yuck, clients flock to your door and tell all their friends. Everyone wants help during tough times.
How to position yourself as a financial problem solver? First, be open to hearing and asking about what is not going right in your client’s life. Then offer a hand with no strings attached and without expecting anything in return.
Let me illustrate.
What isn’t going right?
One client shared with me that his dad was in his late 80s and still managed all his own finances and hand filed his tax return. He knew his dad had amassed a significant estate with many moving parts. My client’s worry? He was the executor of his parents’ estate and had little clue about what his dad was doing. His mother was not involved in any of the financial decisions. The only professional help his dad had ever engaged was an attorney to complete his estate planning documents.
My client is a busy, successful businessman and did not relish the thought of having to clean up a complicated situation when his father died. He also knew that his dad would never hire someone to provide an opinion as to the structure of his estate or to help with investment management.
My response to the client’s concerns was to offer to meet with my client’s dad to review his assets and estate planning documents. In this way, I could become a go-between and help my client better understand his dad’s situation. My client positioned my offer in this way, and told his dad it would help him know what to do if his dad ever needed his help. My client promised his dad I wouldn’t try to recruit him as a client.
My client and I drove out to the father’s house, where his dad stated frankly that he planned to live to 105 and did not understand why his son thought there was a situation to be figured out. However, the father very graciously shared with me a list of his holdings, his tax return and his estate planning documents.
Goodness, what a mess! He had about 60 directly held stocks and stock certificates, a couple million dollars in retirement plans, property in New York (he lived in Florida), old stamp and coin collections and a collector car. All totaled, their net worth was about $6 million.
But it got worse. The father had completed estate planning documents that created a trust — and nothing was titled to the trust! Additionally, the trust left a significant percentage of the estate to many charities and about $5,000 each to 13 grandchildren, with the rest going to his sons after his wife died. (And, by the way, his IRAs were going to his wife, then his sons.)
I’m sure you see what is wrong with this picture. My client would have to probate 60 different stocks and the New York property, plus charities, and 13 grandchildren would breathe down his neck for their share of the estate. Not only that, but his father was leaving assets to charity that were tax free and leaving assets to his sons that would be heavily taxed. If he left the retirement plans to charity, the charities wouldn’t have to pay a dime in taxes. Once the son realized the enormity of the task at hand, the son was happy to pay for our extra service by allowing us to slightly increase his quarterly fee during the time we assisted his father. We charge a flat fee based on complexity and my client knew I had my work cut out for me.
Though the situation was messy, the fixes were easy. We had the dad change the beneficiaries of his IRA accounts to the charities and changed the trust beneficiaries to his wife then his sons. He gave the grandchildren $5,000 each as an immediate gift and removed them from the documents entirely.
The son and his dad opened a retail custodial account for the trust and painstakingly transferred every stock holding to the trust account. He sold the New York property and got rid of the car. He went on his way managing his stocks and doing his taxes by hand.
Unfortunately, my client’s dad did not live to 105 as he had predicted. He died about two years after we helped him straighten everything out. I estimate we saved the family about $600,000 in income taxes and probate and estate administration costs. We also saved my client many hours of his life not probating an estate. My client was very grateful.
Don’t expect anything in return.
The key lesson I draw from this case history is this: When providing help, don’t expect anything in return. Solving problems and offering insight without expectation of quid pro quo eventually comes back to you in some form or fashion — maybe just in the satisfaction of doing a good deed, but more often you get more work from the client and/or additional referrals to boot.
In this case, after my client settled his dad’s estate and took care of his mother’s living situation, he shared with me that he was going to keep all of his dad’s stocks even though they had received a step-up in basis. His mom didn’t need the money if there was a stock pullback. I reminded him that he was a fiduciary not only to his mom, but also to his brothers and it that it might be a good idea to get their input on how he planned to manage the assets.
I smiled when I got an email from my client with copies of emails from his three brothers. One said let it ride in stocks, the other wanted a balanced portfolio and the third wanted something conservative. My client hired us to manage his mom’s trust. We worked with the four brothers to come up with an investment policy to which they all agreed.
Solving problems is rewarding work in many ways.