The Legacy Advisor

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During the next several decades, the largest inter-generational transfer of wealth in history is expected to occur.

Researchers estimate roughly $25 trillion in wealth will be handed down by the parents of the boomer generation, with $7.2 billion going directly to boomers. Understanding the importance of legacy planning in this process, along with the emotional and psychological impact of wealth on these families, is critical in order to ensure the successful financial transfer of these funds. As a result, a significant role will be created for financial advisors to families of wealth as they navigate families through these potentially treacherous waters.

It’s Not Just About the Money
Regardless of the financial assets accumulated by an individual, the legacy left to a family is much more far reaching than the money bequeathed to them.

Just as important are their morals, religious values, family history and how they would like their memory to live on after they are gone.

In a recent study on legacy planning conducted by Ken Dychwald, Ph.D., 77% of parents and adult children (boomers) agreed that the most important issue concerning their inheritance was parents sharing values and life lessons. In addition, another study exploring issues affecting families of wealth interviewed 3,250 family leaders and concluded that family leaders have three main concerns about their legacy and their children’s future:

  1. Will our current plan successfully transition family values and wealth to the next generation?
  2. How can we prepare our heirs so that wealth is a force of good in their lives?
  3. What should our heirs be doing to prepare themselves for wealth (their inheritance) and responsibility?

Historically, only 30% of wealth transition succeeds; with the primary reason of failures resulting from breakdown in communication and trust between family members.

The Challenges
These issues highlight the clear need for financial advisors to redefine the scope of their relationship with clients in order to add significant value. To effectively advise a family of wealth, the trusted professional must be able to understand the importance of shifting his or her conversations with clients from solely leaving a financial inheritance to leaving an emotional inheritance that will reflect the clarity of a giver’s wishes and continuity of family values. As a legacy advisor, you can begin to incorporate educator, facilitator and multi-generational confidant to your job description by focusing on the following:

Establish Your Expertise. In your role as a facilitator in the legacy process, you will need to be able to identify the significant emotional, psychological and financial issues impacting the successful transfer of family wealth. You will need to assess the family resistance/readiness to execute the plan, mediate the difficult conversations and hold the family accountable. But expanding your role from financial expert to focusing on the psychological and emotional issues of legacy can be daunting. You have to assess your own comfort level with conflict and willingness to mediate differences between family members.

Take a multi-generational approach. Depending on the size of the family, there can be four generations involved in the legacy transition process. Therefore, being an effective legacy advisor means you need to expand your view of the client from an individual to the entire family. This requires the ability to understand multi-generational differences in communication and thought, as well as a proficiency in conducting an inter-generational dialogue.

Learn Effective Listening Skills. Good listening skills are an essential aspect of being a successful legacy advisor. You must be able to hear each family member’s story and empathize with their concerns.

The Right Skills
In addition to shifting their thinking about their own role, advisors need to learn the necessary behavioral skills for guiding their clients successfully through the legacy process. Here are some essential steps in that process:

Initiate a Discussion with Primary Individuals (Patriarch/Matriarch) on Creating a Legacy Plan. The primary goal of this discussion is to help your client acknowledge the importance of their legacy. You want them to embrace the powerful role that sharing their mission and vision with the next generation can play in the successful transference of finances and values.

Understand Your Clients’ Money History, Priorities and Value-Driven Behavior. Values change over time in response to life experiences, and each developmental stage of an individual’s life creates opportunity for growth and examination of their values. Understanding this complex interaction between your clients’ values, life events and developmental stages can provide you with insight into their immediate financial needs and concerns, as well as impacting their long-term financial and legacy goals. The key to working successfully with a client is to understand their history, values and priorities first, before helping them to create a legacy plan that reflects these issues.

Conduct Multi-Generational Legacy Conversations. By conducting in-depth, structured interviews with family members and asking relevant questions about all aspects of their views on legacy (such as values, history, family traditions, wishes to be fulfilled, family heirlooms, possessions of emotional value and financial assets), you should be able to identify the unique issues that are critical to their financial well-being.

The most important question to ask is: “What worries you about your future—for yourself and your family?” When speaking with the oldest generation, ask what they want upcoming generations to know about them, their values, lessons learned and life experiences. Explore the impact they want their accomplishments and lessons learned to have on future generations. Ask the younger generation what they want to know and understand about the older generation.

Offer to Facilitate a Family Meeting. The family meeting provides a venue where the family can begin to discuss the issues that were discovered during the legacy conversations with the advisor.

As a follow-up to the family meeting you might want to suggest that the primary client create an ethical will. This is a document that will formally express their thoughts and feelings to their loved ones. You may also want to guide the family to create a family wealth mission statement to help articulate their values and goals and outline expectations, benefits, responsibilities and purpose of family wealth.

The ultimate goal of a being a legacy advisor is to guide your clients to identify the emotional concerns that transcend the financial facts and could potentially impede family relationships. Your essential role in this process is to create opportunities to effectively resolve these critical issues and ensure the successful transfer of wealth between generations.

This article was originally published On Wall Street.


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