Surfing the 'second wave' of estate planning technology

As the financial advisory world expands to include more services and areas of expertise, customer expectations are expanding as well. But when it comes to estate planning, advisors are often falling short.

Despite knowing how impactful an estate plan can be, many practices have yet to incorporate crucial financial documents — such as trusts, wills and other advanced directives — into their service offering. Research from a 2021 Spectrem Group survey underscores this issue, revealing that while 93% of clients expect estate planning as part of their financial guidance, a mere 22% actually receive it. 

Reasons for this gap vary. Some advisors may think it is difficult to establish reliable relationships with attorneys, while others are skeptical about the first wave of legal software that emerged in the 2000s to help with these tasks.

But whether it's navigating a fluid legal landscape, employing AI and machine learning for efficiency in generating trust estate documents or incorporating digital assets, the path forward involves an informed and proactive use of technology. This commitment not only aligns with client expectations but also represents an evolution of the advisory role itself — one that is adaptive, integrated and holistic in nature. 

Recent advances in the fintech landscape, including client relationship management tools that have become functionally integrated into the practices of most advisors, have made it easier to integrate services like tax and estate planning — all without requiring excessive manual configurations or additional labor from advisors. This is important because research indicates that practices that expand their offerings to include services aligned with the long-term goals of clients and their families, such as estate planning, tend to outpace the growth of practices that do not.

READ MORE: 'Generalist' advisors add estate planning value, from trusts to tax efficiency

Laws in motion

From an advisor's point of view, one of the most intimidating parts of estate planning can be the rapidly changing legal landscape. Advisors may find it challenging to track the frequent and often state-specific changes in laws and regulations that affect estate planning and intergenerational wealth transfers while at the same time tending to the wider scope of their day-to-day duties. And with Tax Cuts and Jobs Act provisions sunsetting at the end of 2025, advisors will need help getting ahead of these changes if they are to provide clients with well-informed estate plans.

This is where current software that is proactively adaptive to rapidly changing laws can be a huge asset to an advisor, helping them ensure that their clients' estate plans are not outdated or incongruent with the current legal standards. Firms may be wary of adding more tools to an advisor's tech stack; and indeed it's valid to be on the alert for additions that may turn out to be simply more bells and whistles. 

However, advances in the fintech landscape, including CRM tools, can give advisors easy access to immense amounts of well-organized client data, making the estate planning process simpler to navigate without excessive manual configurations or additional labor from advisors. Advisors can use AI-enabled estate planning software to serve clients more efficiently by radically reducing the time spent on assessing and vetting legal documents. Our firm recently launched such a tool that automates tasks traditionally handled by financial analysts and in-house paralegals, and which generates customized wills, trusts and other estate planning documents.

Virtual signatures

Though digital document signing might seem a relatively minor piece of the puzzle, it is critical to efficient estate planning; however, many states still require wet ink on critical documents like trusts and wills, and the uptake of this technology has been gradual among legislative bodies.

Here financial advisors have a critical role to play. By adopting and supporting technologies that facilitate digital legal document validation, they become key proponents for change. Their advocacy can be vital in pushing for legal reforms that recognize digital signatures in estate planning, thereby simplifying the process and enhancing efficiency for both themselves and their clients.

Crypto comeback?

Last year was a turbulent one for cryptocurrencies, marked by the trial and conviction of Sam Bankman-Fried and the mistrust sparked by FTX's fraudulent endeavors. Yet we see digital assets showing signs of a rebound as several major banks take the proactive step of submitting applications to the Securities and Exchange Commission that could pave the way for these institutions to manage crypto assets for their clientele.

READ MORE: With spot-crypto ETFs on the horizon, here's what advisors need to know

Advisors need to be well-versed in how digital assets function in order to help clients account for them as part of a comprehensive estate plan. These assets will become increasingly common among younger generations, who will eventually need to consider how to pass them on. Ignoring digital currencies means ignoring a growing component of clients' net worth, which is inconsistent with the principles of holistic financial planning.