Lawyers are trained to consider all of the possibilities of legal disputes. They explore angles, contemplate counter-arguments, and prepare for every scenario. They are not prone to rash decisions.
But they do not seem especially prepared for the last decision they will make as professionals, which is to stop working and retire.
On the other hand, those attorneys who have considered retirement, or have retired already, may have spent more time with another attorney than with their financial advisor.
Spectrem’s new Professional Series examines the investment decisions and attitudes of lawyers, a group of investors usually combined with doctors and accountants into what Spectrem calls “Professionals”. For this Professional Series, Spectrem is pulling the responses from each of those occupations to see just how different doctors, lawyers and accountants are from investors in other occupations.
The case for lawyers is that they are wealthier than many other investors, well-informed but not always as ready for retirement as other investors.
“Some of the insights from our Professional Series come as a surprise,’’ said Spectrem president George H. Walper Jr. “What’s surprising about the lawyers is that while they seem to have given proper consideration and invested with an eye toward retirement, they didn’t consider all of the possible topics that come up in retirement, and advisors can use that information to discuss new topics in their meetings with attorney clients.”
The good news is that lawyers do use professional advisors (in fact, the entire series shows that Professionals respect the need to use a professional advisor to handle investment decisions). Eighty-four percent of lawyers have a financial advisor, compared to only 78 percent of investors from other occupations.
Almost 50 percent of attorneys have received retirement planning advice from their advisor, which is the standard rate among all investors. In fact, 53 percent of lawyers say they have discussed retirement income streams with their professional advisor, which is much higher than the response percentage, and indicates that attorneys are considering how they are going to pay for their retirement.
But lawyers show they are not as worried about the finances of retirement as others are. Asked to place their concern about depleting their retirement funds early on a 0-to-100 scale, lawyers put their level of concern at a near-negligible 19.31, well below the average. What’s humorous, perhaps, is that of those who do have a significant level of concern about depleting their retirement funds, 57 percent blame their own spending habits, and that percentage is almost double the rate of other investors.
So where are lawyers substandard in terms of retirement preparation? Only 21 percent have discussed with their advisor the establishment of an estate plan (although 28 percent say they have discussed this issue with someone other than their primary advisor). In fact, only 22 percent of lawyers have an estate succession plan in their written financial plan with their advisor, compared to exactly double (44 percent) among other investors.
The difficulty for advisors working with lawyers is that there is very likely another voice in the conversation, and that would be the lawyer’s own personal attorney. The Spectrem research shows that attorneys have a higher regard for their own personal attorney than other investors, and it is a higher regard than they have for their advisor.
This relationship status is borne out by the fact that 61 percent of lawyers have disused a wealth transfer plan with their attorney (compared to 44 percent of other investors) and only 49 percent have discussed wealth transfer with their financial advisor.
Top Takeaways for Advisors
Most investors discuss their financial and investment decisions with more than just their primary advisor. Whether it is friends or family or spouses or their family attorney, investors do consult with more than just one person on key financial matters.
When it comes to dealing with clients who are attorneys, advisors must know that those attorneys are going to talk to their personal attorney on the big issues, and retirement and wealth transfer is one area that they are definitely going to want to consult with their attorney. Advisors should respect that relationship and find a way to contribute their own point of view to what the attorney is saying, or find a way to display a special knowledge on investments related to retirement that the attorney cannot duplicate.
Since the research shows that lawyers tend to go elsewhere to discuss estate planning, advisors should at the very least understand the extent to which their lawyers clients are prepared for wealth transfer and see if there is any area that is being overlooked.
©2017 Spectrem Group