Encourage the family talk

Along similar lines, a recent report from the BMO Wealth Institute, a division of Toronto-based Bank of Montreal, indicates that only 22% of adults with parents over the age of 60 have had detailed conversations about their estate plans.

Most financial advisors recognize that their clients’ lack of communication with family members as a problem. Here are five ways in which to address this gap:

– The barriers to family conversations

I recently hosted a roundtable with eight financial advisors who deal with accounts of $2 million or more. These advisors identified five major reasons why affluent clients resist talking about finances with their adult children:

1. Need for control. First is the need of some Type A personalities for control. For some clients, talking about finances with their children raises concerns that the parents might sacrifice some of their freedom to change their minds down the road.

2. Concern about children taking over. In addition, aging clients sometimes are worried that their children may attempt to take over the clients’ finances. Those clients feel threatened by any conversation about their financial situation.

3. Potential acrimony. Some clients are concerned that talking about the disposition of their assets may lead to acrimony among children who feel hard done by. Rather than confront this disappointment now, it’s easier simply to say nothing.

4. Lack of urgency. Many clients don’t view talking to their children about their finances as a pressing matter or a priority.

5. Procrastination. Even for those clients who recognize they should have these conversations, procrastination makes it easy to put them off.

The advisors offered the following strategies to overcome these obstacles:

1. Facilitate the conversation. Several advisors said they offer to facilitate family conversations on finances. These discussions have the potential to be very emotional, so having a dispassionate third party can help smooth over the rough patches and keep the conversation on track.

It’s also important to set clear expectations for both clients and their family members. That’s one reason that a couple of advisors suggest preparing an agenda for the meeting and, if possible, sharing that agenda with family members in advance.

2. Ensure your clients feel in control. One advisor has had success by allowing her clients to control what is discussed at family meetings. This advisor sits down with clients and reviews a checklist of potential items for discussion; among the items on this list are:

– estate plan and trusts

– insurance – life, long-term care and other

– value of investments, assets, possessions

– how current investments are allocated

– the will

– executors

– power of attorney.

This advisor and her clients agree on the items to cover at the initial family conversation. The advisor also offers to meet with her clients in advance of the family meeting to preview what they’ll talk about.

This advisor has found that the initial conversation is, by far, the hardest. After the first conversation, even clients who had shown some initial reluctance generally are willing to sit down with family members a second time and go into more detail about their financial affairs.

3. Start with small steps. Another participant at the roundtable mentioned that he’d modified an idea from my column from June 2012 entitled “The key reason you aren’t getting referrals – and what to do about it.”

That article profiled an advisor who’d had a client pass away, leaving his affairs in disarray. This advisor and the client’s daughters spent months tracking down all of the client’s accounts and, at the end of that time, still weren’t certain there wasn’t money missing.

As a result of this experience, the profiled advisor approached his top 50 clients and suggested that they bring in copies of all of their statements – not just those relating to investments, but also all their bank accounts, insurance policies and bills for cable, utilities, property taxes and water- to the next meeting with the advisor. Working with each client, the advisor created a spreadsheet listing account numbers, addresses, phone numbers and contacts. After the meeting, he emailed the resulting document to the client, suggesting that the client protect the digital document with a password and give it to his or her lawyer (who would know the password) to go with the client’s will.

The advisor at the roundtable took this idea one step further: after preparing the spreadsheet, he suggested to his clients that they review the document with their children. Few clients felt threatened by this exercise; after all, they were simply letting their families know where they held accounts but were not getting into specifics about holdings.

The advisor at the roundtable found that in some cases, this first conversation broke the ice and, as a result, his clients felt more comfortable going on to talk about the details of their finances with their children on a subsequent occasion.

– Enlist reinforcements

One advisor talked about the former CEO of a public company who was resistant to having this family conversation. In advance of a joint meeting with the client and his accountant and lawyer to discuss tax and estate planning, the advisor called to let the other professionals know that he planned to raise this topic again with the client and ask for their support for his recommendation. At the meeting, both the accountant and the lawyer weighed in, supporting the advisor’s suggestion, leading to the client’s agreement to having that family conversation. The client also agreed that it made sense to invite his lawyer to sit in on the family meeting.

A couple of advisors at the roundtable mentioned that they’d talked to clients about getting their lawyers involved at family meetings. While this works on some occasions, some clients are resistant to paying the hourly rate for their lawyer to sit in. Still, you should not ignore the opportunity to enlist lawyers’ support.

– Use third-party support

A sense that there’s no urgency to have family conversations can cause your clients to procrastinate. One advisor mentioned that he’d struggled to get a business owner in his 50s to agree to focus on estate planning until someone the same age at the client’s golf club had a heart attack and died.

Another advisor had recently talked to a client about tax planning, using an article on how the sudden death of actor James Gandolfini of The Sopranos fame had left his family with an unnecessarily high tax bill. When I mentioned the recent Times article on the price that one family paid for poor communication, a number of advisors asked for a link to the Times article, so that they could use it in conversations with clients with grown children.

As you think about your client meeting schedule between now and the end of February, write down the names of five key clients with adult children who haven’t had conversations with family about their finances. When you meet with those clients, see if some of these strategies can persuade them to move forward on these discussions.

Dan Richards is CEO of Clientinsights (www.clientinsights.ca) in Toronto. For more of Dan’s columns and informative videos, visit www.investmentexecutive.com.

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