‘Huge job for financial advisers’ in estate planning

In a recent white paper, The Great Wealth Transfer, investment bond specialist Foresters Financial looked at the importance of estate planning to prepare for the event of a death and ensure a smooth wealth and asset transfer from the departed to beneficiaries.

Speaking with ifa, Emma Sakellaris, chief executive at Foresters Financial, said the firm’s research has shown that Australians are not adequately prepared to talk about death – and definitely not prepared to talk about wealth transfer.

“My view on financial advice is to really take more of a long-term view and not just the current client view, which I know is hard because of the way the models work, as far as APLs and remuneration, but I do think there’s a huge job for financial advisers here, just with how they both implement and support the implementation of succession strategies,” Sakellaris said.

“But also how they start to ask questions outside of the box about enduring powers of attorney a beneficiary’s prepared, how can they help prepare beneficiaries, but also who else can be in the client’s circle of support to help with that transition?

“They can play a really important role in expanding the client’s circle of support, even though they may not make money doing that in the short term, it really adds to the latent value of that adviser’s relationship, so when that client does pass, they’ve already established relationships with the beneficiaries so they can both help manage the money into the future, but also they’ve got a business continuity plan.”

She explained that, when looking at multi-generational planning, it is important to remember that just because they have money, it doesn’t mean they know how to manage or protect it.

“A lot of people who inherit have never had these lump sums of money before,” Sakellaris said.

“When we administered estates, as soon as beneficiaries had money, there was a tendency to enjoy that money as opposed to protect and grow that money.”

It is in stark contrast with how many later in life handle their money, she said, pointing out that many will aim to preserve their assets in order to pass them on.

“People for many, many years have viewed superannuation as a wealth transfer vehicle, not a retirement funding vehicle,” Sakellaris said.

“If you speak to people in pre-retiree or retirement phase, they are somewhat unwilling to spend money and they spend less as they get older, which is rather sad and perverse.”

According to Sakellaris, financial advisers have an important role to play in improving the financial literacy of not just their clients, but also their beneficiaries.

“It’s through inspiring clients to really share and help family members understand money,” she said.

“Whether it’s sitting there with your children or grandchildren, showing them how to trade shares or showing them how to understand the difference between capital and income or any of those things. That opportunity that lacks in today’s society for families to share and to learn from each other.

“I think the financial adviser can really encourage clients to share and help their children or their grandchildren learn from them as part of that legacy.”

Sakellaris explained that advisers can also utilise topics like philanthropy to get conversations started, but the focus needs to be on taking “any opportunity to get multiple generations around the table talking about money”.

“This is not just my bias, this is a genuine suggestion, but things like investment bonds and philanthropy that have a future lens can really help get generations talking about money and get generations talking about the test data or the advice client’s legacy,” she said.

“It can also help with that financial literacy and that understanding of wealth and understanding of how that might be managed across the future generations.”