Blog: Time for "The Talk"


When my daughters were in 5th grade, they often asked me, in-between giggles, when we were going to have “the Talk”.  As those of you who are parents probably know, “the Talk” was usually the first (and sometimes only!) discussion you might have with your child about sex.  Dependent upon your family communication rituals, these conversations could be very matter-of-fact, or very awkward.  My own conversations varied greatly, and usually I learned more than I taught.
So, that was one of the first awkward conversations within your family.  Now it’s time for another.  Whether you are a parent (or the son or daughter of an elderly parent) who is reading this, or if you are a financial advisor or professional, it’s time to have another familial “Talk”.  This time it’s about something none of us really wants to think about……what happens when we die?  Now I’m not referring to one’s beliefs about the hereafter.  I’m focused on the practical application of what will happen to your finances (or your client’s finances) upon one’s death.  And what happens right before one’s death?  Is it appropriate to plan for the worst-case scenarios?  And how can you do that if you don’t talk about these scenarios?
I don’t think you will be surprised to find out that, according to Spectrem research, half of investors are worried about someday spending time in a nursing home or other long-term care facility.  Women are more likely to be concerned about this issue than men.  This makes sense since women tend to live longer and are more likely to end up in a nursing home or other facility.  More than 60% of both genders are worried about a catastrophic health event.  Even though many investors feel confident that they will have enough assets to make it through their lifetime, they fear that health issues might change their ability to make it comfortably to the end.  Yet the research indicates that less than a third of investors own long-term care insurance.  Now, in some cases, long term care insurance is not the appropriate answer, however, in most cases, investors haven’t even discussed the possibilities with their financial advisor.  Additionally, most investors have not discussed this topic with their families!
Another important issue related to the “death” topic is having a will.  Spectrem’s research indicates that investors are more inclined to have put a will in place than to have dealt with other issues.  For example, 67% of Mass Affluent households (those with $100,000 to $1 million of net worth) have a will, as well as 83% of Millionaire households (those with $1 to $5 million of net worth) and 91% of UHNW households (those with $5 to $25 million of net worth).  Fewer households have a trust in place.  For example, fewer than half of households with more than $5 million of net worth have a trust.  It’s interesting to note as well that fewer than 60% of households with more than $25 million of net worth have a trust. Despite the present uncertainty regarding tax laws (including the death tax), it’s still important to have these discussions with investors.
What are the key questions to ask during “the Talk” with your clients or family member(s)? While we all hope to pass on while sleeping peacefully in our bed, sometimes that just doesn’t happen.  Generally the conversation regarding what could happen needs to be forced.  Here are some key questions: 
  • Who has access to your accounts?  Checking? Savings? Other?
  • How many accounts and relationships do you have?  Who should be contacted?
  • Is there a will in place?  Who knows where it is?  Who should be contacted?  
  • Do you have an accountant?  A lawyer?
  • Where do you keep copies of tax returns and other important documents?
  • Who should make financial decisions if you become incapacitated?
  • How much do your children know about your financial information?  When do you want to introduce your children to your financial advisor?
Having a discussion about these questions will lead to a discussion of other important questions.  How do you feel about a nursing home?  Would you be willing to move to an extended care facility? What would be the financial impact of these decisions?  These are all questions that individuals do not want to address because they feel it won’t happen to them or they want to decide once it actually does happen.  In many cases, the decisions are made too late.
In qualitative focus group research conducted by Spectrem with individuals over the age of 70, we found that most of the individuals had not addressed any of the questions above.  In their own minds, everything was taken care of, however, they had not discussed these issues with their children or with their financial advisor.  There was still “plenty of time” to have these discussions.
One of the best ways to monitor whether it’s time to confront clients is by using Spectrem’s Investor Profile Tool.  This tool will help advisors to understand what investors are worried about.  Advisors can filter by the age of investors and compare the attitudes and portfolios of individuals in the same age group to their own customers.  It can even help to identify the likelihood of whether or not a specific type of customer should have a will or trust.  This can prompt advisors to have the big discussion about many of these “later in life” issues.  For more information, click here….
The information one will learn when having “the Talk” clearly differs based upon which generations are having the discussion.  The Talk one has as a pre-teen is important but the Talk one must have with clients and family members later in  life is equally as important.