Why estate planning expertise is now critical for advisers

MLC’s Keiran McIlwain outlines why and how greater estate planning expertise is critical for today’s financial advisers. 

The last five years have been very challenging for financial advisers. The industry is under tremendous pressure to demonstrate the value of advice and this is making it difficult for advisers to retain and attract clients. 

Existing clients have made it clear they want ongoing advice that focuses on their life-specific goals and a portfolio and/or policy review is simply not enough. 

Also, in an increasingly digitised world, more people are becoming comfortable with managing their own investments and arranging insurance cover without seeking financial advice. 

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Take the self-managed superannuation fund (SMSF) sector for example. It’s the fastest growing super sector in the country and its need for, and use of, traditional financial planning services is arguably diminishing. 

It would appear that less than half of SMSFs have not seen a financial adviser in the last 12 months and these funds collectively control more than $300 billion in assets. 

The opportunity 

There are a number of ways advisers can change their approach to wow their existing clients and attract new ones. 

One of these is to make estate planning an integral part of the advice model. While this idea is certainly not new, many advisers still see estate planning as nothing more than referring clients to a solicitor for preparing a Will and Power of Attorney.

This seriously underestimates the value both to clients and advisers that quality estate planning can provide. 

Added to that, it appears the number one untapped advice need of SMSF members is inheritance and estate planning. It’s also reasonable to assume existing advised clients would put estate planning high on their priority list. 

Furthermore, it’s broadly recognised that because relationships and family circumstances change frequently, estate planning is anything but ad-hoc. There is a recurring need to review the estate planning aspects of a client’s finances. 

The benefits 

Financial advisers who skill up on estate planning matters have much more to offer clients than those who consider it nothing more than a compliance obligation.  

What it enables you to do is have more meaningful conversations with existing clients.

As previously acknowledged, these people are looking for advice that addresses their life goals and what goal could be more important than ensuring you ultimately leave your loved ones in a secure financial position. 

Having a thorough understanding of estate planning makes you attractive to SMSF members and other people who are looking for assistance in this area.

This then creates the opportunity to establish long-term client relationships and provide insurance or other traditional advice services where required. 

There is also the opportunity to expand your client base by developing advice relationships with the broader family unit. 

Your knowledge 

Thorough estate planning can be complex and should be a collaborative process where the specialist expertise of financial advice, taxation and legal professionals are brought together in a co-ordinated manner. 

But to have meaningful estate planning conversations with current and potential clients, you don’t need to know everything that the other professions can bring to the table. What’s key is you understand the: 

Different structures through which wealth can be held 

Why your clients have or might want to use these structures to achieve their broader business and personal goals  

How interests in these structures are dealt with on death, which will not necessarily be via the estate, and 

Ways to ensure money held in different structures can end up in the hands of the right people at the right time. 

Your role 

If you want to take a more active role in helping clients achieve their estate planning goals, it’s important you understand your position in this collaborative advice process. This should be to ensure: 

• The overall estate plan suits the client’s holistic needs and circumstances 
• All recommendations you make are consistent with the agreed plan 
• Sufficient assets will be available to fund the estate plan, and 
• Sufficient and suitably structured insurance is arranged to fund any asset shortfall. 

Finally, it’s essential to: 

• Have a referral network of lawyers and accountants that you are comfortable working with as a ‘team’, and  
• Have sufficient knowledge and confidence to challenge advice provided by other professionals if it doesn’t make sense. 
• While estate planning can be complicated, those who invest the time in having engaging conversations with clients about their estate planning needs are likely to be well-rewarded.  

Keiran McIlwain is head of technical and development at MLC Advice Services.