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Visiting the Mound

Conversations financial advisors and their clients should be having in the seventh-inning stretch of a wild year

By Cody McAlester | August 25, 2020

Many of us watched the clock strike 12 on Jan. 1, 2020, with reflective optimism. Nearly 60% of Americans participate in the annual tradition of making resolutions, and, even though most are unsuccessful, the practice of reflection inspires many to make the next year better than the last. But so far, 2020 has been a swing and a miss for most Americans.

We didn’t make it to spring training before the S&P 500 began its 30% plunge, igniting fears about investment portfolios and financial futures. Fast forward to today, and coverage of COVID-19 continues to saturate the media, sparking a significant rise in anxiety levels about estate planning, and even mortality. But if a global pandemic isn’t scary enough, consider these bone-chilling statistics:

  • 60% of U.S. adults do not have a will;
  • 70% of U.S. adults do not have an estate plan; and
  • 40% of affluent investors rate having no estate plan as their biggest concern.

Mike Flinn, national sales manager for BOK Financial Advisor Trust Services, says financial advisors and their clients should be addressing concerns beyond pure portfolio risk and asset allocation, especially during these periods of extreme uncertainty.

“Financial advisors typically don’t provide legal advice, so they must have a referral association with a local estate planning firm that understands and respects their role in their client’s trusted circle of service providers,” said Flinn. “Collaboration between estate planning professionals and the client’s financial advisor typically lead to the best outcomes for all involved.”

So what are some of the topics advisors and clients should be discussing?

Addressing the injured list

Medical decision documents are an often overlooked topic that is incredibly important. With the state of personal and public health so top of mind right now, covering these bases is a no-brainer for advisors and clients:

  • Healthcare directive—What healthcare measures do you want to be taken if you become incapacitated?
  • Healthcare durable power of attorney—Who do you want to make decisions if you are incapacitated?
  • HIPAA authorization—Have you authorized your healthcare providers to share information with your decision makers?

“More than one-third of U.S. adults do not have a healthcare directive,” said Flinn. “Regardless of marital status, these are all essential documents for any client or family member over the age of 18.”

What happens after the ninth inning?

A crucial part of a basic estate plan, many individuals have questions and concerns regarding trusts and wills. Although providing specific legal advice is not recommended for advisors, there are several vital topics advisors and their clients should be thinking about:

  • Benefits of a revocable/living trust
  • Choosing a suitable successor trustee
  • Avoiding probate with efficient distribution of assets
  • Reducing estate and gift taxes
  • Caring for minor children
  • Caring for special needs beneficiaries
  • Preserving assets for future generations

“Each of these topics can lead to a more substantive dialogue between advisors and their clients,” said Flinn. “Addressing these topics is the difference between a money manager who simply recommends stocks and mutual funds, and a true advisor relationship.”

The ongoing coach/team relationship

For many advisors, the relationship with their clients doesn’t stop with the individual. Many serve in a trusted capacity for the entire family. Clients who wish for their advisor to remain an integral part of the family’s trusted inner circle of service providers after they pass or become incapacitated should address the subject.

“Many individuals are unaware of the advisor-friendly trust model that will allow their advisor to handle the asset and relationship management, in conjunction with an institutional trust company as trustee,” said Flinn. “This model allows for clients and their beneficiaries to utilize experts to provide professional trust administrative services while outsourcing the investment management services to their preferred financial advisor.”

An arrangement like the one described can result in peace of mind for the client, their beneficiaries and ultimately their financial advisor.

“In these unsettling and unpredictable times, it’s essential that all of the players on a client’s financial team are on the same page,” said Flinn.