President's Letter - Protect Yourself and Your Client


Have you ever had a client who died and you didn’t know who to turn to regarding his or her assets? Probably not, because you are a diligent advisor. Did you know, however, that only 46% of investors have arranged for a financial power of attorney should they become incapacitated? Only two-thirds have identified beneficiaries for all of their accounts.

Spectrem recently focused its research on some of the end-of-life issues that everyone faces (see Down to the Last Detail: Setting Your Financial Affairs in Order ) and found that while most investors feel they are fairly well prepared should something happen to them (either due to long-term illness or an unexpected event), the reality was that most were not as prepared as they thought. In fact, while 86% indicated they felt as if they had planned for what would happen when they passed away and needed to have their assets distributed, fewer than half had even made a list of their assets and accounts.

While the research indicated that only 22% of investors have discussed the issues of what would happen if they were to pass away, that doesn’t mean that financial advisors shouldn’t be trying to proactively address end-of-life planning with their clients. These are difficult and detailed discussions that investors often don’t want to have, but after dealing with the issue, will feel much more comfortable regarding what will happen in the case they become incapacitated.

Spectrem found that 53% of investors indicated they have a plan in place for beneficiaries to access all of their accounts upon their death. Not surprisingly, the likelihood of having this type of plan in place increases with age. Seventy-one percent of WWII investors have completed this task but only 30% of Millennials have done so. Surprisingly, only 58% of Baby Boomers have completed this task. Most advisors have a client base that includes a significant number of Baby Boomers, thus this could be an important discussion to have with your Baby Boomer clients. Similarly, only 39% of Gen Xers are prepared. As households in the midst of child-rearing and careers, Gen Xers also have a need for assistance in this arena.

One of the first tasks a financial advisor should do is to force investors to make a list of all of their assets - including bank and investment accounts, as well an non-investment assets such as real estate, collectibles, etc. Secondly, make sure that the investor has provided access to those assets to a family member or other appropriate individual. Clearly, it is more important for older investors to complete this task, but it would also be helpful for younger investors - including the ability to update on an ongoing basis.

As you can see from the charts above, there are many Baby Boomers who have not completed these tasks and even a fair number of WWII investors who need to deal with these issues. Needless to say, many of you may feel that this is not an appropriate task for financial advisors. Investors today, however, are looking for financial advisors to assist them with their entire financial life. Not only will this increase client loyalty, it will inform the financial advisor if there are opportunities for additional advice or guidance.

Adding this type of advice to your practice will not only allow you to ensure your own account and beneficiary designations are up-to-date, it will provide peace of mind to clients that often put off making important decisions that may ultimately become problematic if not addressed before any catastrophic event.