To maintain family assets from one generation to the next, build emotional trust and work with legal trusts when it makes sense.
Many financial advisors build their business through traditional methods — cold calling, relying on family and friends, seminars and networking.
Once they sign a client, good advisors will spend countless hours working to provide top-quality service while building assets. A fruitful relationship for a financial advisor can span decades yet disappear in days after a client passes. Trusts are a powerful way to address the issue.
Studies show that 90% of financial advisors will lose a client when the husband dies. Multiple clients passing in a short time frame can be catastrophic to an advisor’s career.
Common retention strategies inside the financial advisor community focus on actions to be taken after a client passes. As the statistics show, trying to establish a relationship with the next of kin can prove to be a fool’s errand.
The right way for financial advisors to ensure they maintain assets is by building emotional trust in order to recommend a financial or legal trust.
Assets held in a trust account are far less likely to be moved upon the death of a client by an heir. Trusts can allow assets to remain under an advisor’s management for the next generation, especially when a strong relationship has been developed with the trustee.
In many states, a well-drafted trust can direct that a financial advisor manage the trust assets. There are three key steps to introducing a trust and opening the door to client retention: timing, education and a trusted partner.
1. Timing the Conversation
Financial advisors freely discuss tax planning with their clients yet often shy away from discussing mortality.
Asset protection should be a key goal for any financial advisor, and that includes ensuring that the wealth being built is protected in the future. Consider discussing trusts at the client’s 10-year anniversary once a track record of success has been created.
Keep in mind that the financial advisor only needs to recommend that a client speak to a trustee; being knowledgeable on every aspect of estate planning is not necessary. An experienced trustee will be able to provide clients with peace of mind while easing them through what can sometimes be a difficult conversation.
2. Explaining the Benefits
While a financial advisor does not need to delve into all the intricacies of a trust, it is helpful to understand the two benefits that clients point to most often — asset protection and tax planning.
A trust can maintain control over assets after the death of the client for immature and/or irresponsible beneficiaries, beneficiaries with substance abuse or gambling issues, and separate and protect the assets for children of a previous marriage from the needs of successive spouses.
There is a high likelihood that exemption from federal estate taxes will drop in 2026. If Congress fails to act, the need for tax planning will increase for certain client segments. It’s best to begin creating a game plan before the time possibly comes.
3. Finding a Trusted Trustee
Of course, some trustees do also provide wealth management services. A savvy financial advisor will perform due diligence on a trustee before creating a working relationship.
Good trustees will have years of experience, be able to share their process with a client and assure that they will serve a supporting role in the client relationship. The financial advisor should always lead the way.
If the trustee does provide similar services, a memorandum of agreement can be signed outlining the terms in which referrals to the trustee will be handled.
Even if a client isn’t interested in establishing a trust, the discussion can yield useful information about family dynamics and additional assets.
James M. Benedek is the president and CEO of Intrust Counsel. He holds the CFP (Certified Financial Planner) and CLU (Chartered Life Underwriter) designations and is a Certified Independent Trustee. He also is a member of the Missouri Bar and teaches financial planning courses in South Florida.
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