Escalent: Some affluent investors don’t have estate plan

Many affluent young investors still lack basic estate plans, new research shows. That’s a gap that presents financial advisors with a significant chance to add value.

A recent survey of 4,938 investors by market research firm Escalent found that 31% of affluent investors (those with at least $100,000 in investable assets) haven’t established an estate plan. Among affluent millennial and Generation Z respondents, 42% reported that they do not have a will or trust. 

“That’s an opportunity for financial advisors and asset managers [because it] requires a good guide for navigation,” said Kristin Hall, report author and senior product manager at Escalent’s Cogent Syndicated division. “[An] advisor really needs to take a coordinate role there and be the hub for the whole financial experience for somebody.”

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Steve Ethridge, the senior director of Cogent Syndicated, said many investors likely put off estate planning because they feel they have more pressing priorities. Younger investors in particular may believe it’s too early to think about what’s often considered end-of-life decisions, Hall added.

“But not everything’s going to happen at the end of life — or sometimes your life comes up sooner than you think it will,” she said. “Preparing today is better than [in] the future.”

‘Sometimes it takes a story’

For advisors, introducing the topic of estate planning early in the client relationship can be key, even if the discussion is tricky. Sam Mockford, an associate wealth advisor at Citrine Capital in San Francisco, California, said that she initiates this conversation during the first meeting with her clients to clarify their goals and values. However, she said it’s important to acknowledge that it might be uncomfortable for some clients to think about death.

“I do hope that we are attuned to their body language and their direct words,” she said. “Someone I work with, they say, ‘I know this is kind of doom and gloom, but we want to make sure we take care of all the people you love. Let’s talk about this.’ That’s very kind and sensitive.”

READ MORE: Ask an advisor: How can I talk about trusts without dwelling on death?

Estate planning conversations don’t have to be scary and blunt, said Marguerita Cheng, CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

She recalled working with a client who, after facing the emotional challenges of losing her father and then the complications of probate, was motivated to take a more proactive approach with her living mother to avoid going through similar hardships again. Cheng said that sharing anecdotes like this with other clients can help them realize the importance of putting an estate plan in place.

“Sometimes it takes a story,” Cheng said. “It’s important to engage in these courageous conversations. It’s exactly what I told my dad: ‘I want to ask you while you’re healthy and sharp because it would be inappropriate for me to decide what you want to do.'”

Opportunities for financial advisors

The Escalent survey also found that nearly 67% of younger investors without a will or trust said they were likely to use online estate planning options, and about half of surveyed millennials said they planned to seek help from a financial advisor. 

Etheridge said that combining online solutions with personal guidance in a hybrid approach could give advisors a competitive advantage in estate planning. 

“That’s an ongoing huge historical opportunity,” Etheridge said. 

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Mockford said her firm pays for an online Trust & Will package to make it easier for clients to get started on basic estate planning needs. While digital tools offer some conveniences, follow-up is key, she said, citing examples like sending monthly reminders about initiating or updating estate plans. 

Advisors should also be proactive about educating clients on changes in tax laws, Etheridge said. 

Hall added that the Escalent research revealed another area of opportunity for advisors: “self-directed investors.” 

“Their level of preparation is lower than those who actually use financial advisors,” she said, “so there’s definitely an opportunity to reach out.”