Guarding clients’ most precious assets

Over the last 16 years, I have worked with advisers across four continents.

One of the most successful strategies for cementing client relationships and building business I have seen has helped a number of advisers in the Canadian market to grow client numbers and assets by as much as 30 per cent. How? By taking care of the most precious of clients’ possessions — their children.

One of the more difficult decisions a family has to make is deciding who would look after their children in their absence, should tragedy strike. That decision is never easy, because it means thinking about the possibility of your death and not being around to watch your children grow, not being able to enjoy their graduation, or wedding day. It really conjures up a lot of images that are difficult for clients to work through. But it is dealing with these issues that can really separate the financial planner from the product pusher.

It is issues like this — and not whether you got them another 25 or 50 basis points, or picked the winning managed fund this year — that provide the reason for clients to remain with you and refer business to you.

Many families, and their financial or legal advisers, would typically address this issue superficially in the context of a will and general estate planning. This shallow approach misses the opportunity to get to the things that matter to clients, and also misses a tremendous opportunity to leverage referrals.

One of the issues that an adviser can help a family specifically focus on is the selection process of a guardian. For example, does the guardian share the same child rearing values, lifestyle ideals, and religious beliefs? It would be very hard to find guardians who think exactly the same way as the parents do in all of these matters, but it is important to find somebody as close as possible.

Quite often, people will select their parents as default guardian, however, this is not as straightforward as one may think. If contemplating appointing a child’s grandparents, it is critical to consider whether the parents are physically well enough to take on the job, whether they have the energy for a younger family, and their patience for teenagers.

Also important is location — will the children need to change schools and what are the issues surrounding that decision?

If considering a friend over family, how will the family feel about this? It is important to educate the family to understand the decision, and reduce alienation and disagreement that decision may cause.

Other important questions to address include:

* Would the proposed guardian(s) want that role?

* Are they competent to do so?

* Do they understand what the obligations are?

* Are they capable of handling various responsibilities — financial or otherwise?

* If it’s a large family, is someone capable of handling all of it, do they have children, and how would the families integrate if the need arose?

* If it was a third party, would they be able to be objective and have the best interests of the children at heart?

* Would they give the family access to the children and would they make sure that the family remained actively involved in the children’s lives?

* What surname will be used?

If the children are teenagers, the parents may want to ask their opinions about it. That is a difficult decision because children may find this a difficult matter to discuss. With very mature children this is a good practice, but with younger children this is probably not the thing to do.

Given the various family structures today, it is critical to consider the stability of the relationship and household of any potential guardian. A break-up of this family could be a disaster for the children. It is not just the appointment of the guardian, but all the various potential situations after that appointment that require careful consideration.

Insurance planning is a natural area to address, making sure there are sufficient resources to cover the children’s needs. Discussion points include whether there is sufficient money to educate the children, the guidelines for taking money out of the inheritance, and ensuring the guardian is not financially burdened with the care and welfare of the children.

Why would an adviser go to this trouble? You position yourself to be the caretaker of the family’s financial wellbeing and to be the guardian of the client’s net wealth, which both cements and adds value to the client relationship.

It is a real opportunity to look after something that is most important to clients, and a real opportunity to introduce yourself to new people in your business.

Additionally, you are never going to get a stronger referral than the one you get when the client approaches the potential guardian to sit down with you to discuss these matters. It sends a clear message to the guardian that you are trusted, thoughtful and worthwhile to do business with.

It is very likely that the guardian’s adviser has not addressed the issues as thoroughly. What better entrée for a referral?

Peter Hodgson is head of sales and marketing atInvesco .