By Vic Ruth

Vic is the co-founder of Estplan Pty Ltd, a visionary firm which educates and guides advisers offering family wealth management services. He has had a stellar career spanning 30 years and gained national recognition amongst financial advisers.

 

Have you considered the opportunity cost of not engaging with your primary clients families?

At a time when many practices are struggling to deal with a flat market and change, there is a vastly ignored prospect base that can assist you to develop practice longevity. Estplan is committed to ensuring growth by assisting practices to develop a strategy that helps manage and retain an ageing client (defined as baby boomers and above) base.

 

The following case study is the last in a series of 3 which aims at sharing some of the common issues and opportunities faced by advisory practices. Whilst this case study reviews the benefits of a family negotiation service, it also opens up the benefits of successful collaboration with other allied advisers.


Situation Analysis:

In a regional town in central NSW, a financial planner (let’s call him Tim) had a quality relationship with a top client (Jack) aged in his late 50’s.

 

Jack runs a successful family plumbing business locally, along with his two sons. The sons are 39 and 41, married with children and provide a succession plan for the father when he wants to retire. The youngest son is happily married. However, the eldest son in the last 5 years has experienced 2 trial separations and the marriage can be described as unstable.

 

The Plan:

Jack (the primary client) has completed an estate plan 10 years ago with Tim, his lawyer and accountant.

 

The plan provides for the business to be transferred to the sons and all other assets to his wife who does not work in the business.
With this arrangement the wife will be well provided for with the planning done to date.


The planner has a good working relationship with the client’s accountant. The two sons have their personal accounting done by another accountant in the town.


At the last review, Tim discussed problems that could occur should the eldest son’s marriage breakdown. It was decide to review the estate plan to cover this contingency.


Another alarming discovery during the review was that the sons did not have wills or any risk insurance.

 

The planner sought the permission of the client to discuss the options with the accountant.


Adviser collaboration strategy:

The planner took the lead on the discussion with the accountant on behalf of the client.

  1. It was decided that since Tim had closest relationship with Jack and better relational skills, he would play lead in the advisory team.
  2. The service provision to date was focussed on Jack and his business. It was decided that a better result could be achieved if the focus broadened to include the family’s needs as well.
  3. It was agreed that a family meeting should take place with Jack, his wife and 2 sons. The son’s wives where excluded at this initial stage. Tim chaired the meeting and the accountant took minutes.


The Meeting:

A meeting agenda was prepared and included:

  • Welcome and purpose of meeting. (The purpose of the meeting was to create a shared view of what would occur in the event of certain contingencies. These contingencies include death, disability, retirement or termination of a family member).
  • Discuss and document an agreed set of family values as a business/family decision making framework. All family members would be encouraged to contribute to these discussions. Values in the event of a contingency happening would include;
    • Leadership – who will take what control
    • Provision – the responsibility to provide
    • Communication – how they communicated with each other and with their advisers
    • Care – what are the caring roles that maybe required in the family
    • Education – the role of education for the next generation
    • Tradition – binding the family values between generations
    • Generosity – share their good fortune with those less fortunate in the community
  • Discuss and agree to update the estate planning affairs of each family member to reflect the agreed family outcome on the death of a member.
  • Discuss and agree the financial needs of each family member in the event of the life contingency happening.
  • Where appropriate life risk insurance would be needed to supplement the needs in the event of any shortfalls. This would be especially relevant to the two sons.
  • Agree on a family charter that summarises all the above.

 

The meeting took place at a retreat hired for the purpose.


The Result for the Client:

  1. Family members were apprehensive at the outset but soon settled down when it was demonstrated the meeting was a genuine attempt to place a sense of order into some important family issues.
  2. A family charter including values was agreed to, which created a frame work for further family decision making.
  3. The meeting minutes read:

Leadership – in the event of dad leaving the business, the 2 sons would take control as joint managing directors. Dad would continue to be the family leader as long as he was able and willing. Mum would continue her role as spiritual leader of the family as long as she was able and willing.

Provision – the business would be the main provider for the families, however, when Dad retired, the business would pass to the sons and he would live off superannuation and personal investment. Life risk insurance would be taken out by the sons as part of a buy sell agreement between them to supplement any shortfall in the provision for their families

Communication – apart from the family charter, the primary client’s estate plan would be be updated to reflect the decisions of the meeting. The sons agreed to complete new estate plans to tie in with their family needs. Special attention in the plan would be given to the marriage break up of one of the sons and a son pre-deceasing mum and dad.

Care – the sons agreed that, as their parents aged, they committed to key roles in helping with their aged care needs when necessary.

Education – the sons agreed to have meetings with their families to introduce and gain support of the family charter.

Tradition – it was agreed to arrange family meetings on a regular basis (if not informally) that would include the sons' families.

Generosity – Family members would select worthwhile causes and agree to contribute to them as a family and, should the family wealth continue to grow, a family charitable foundation would also be considered.



Positive Results for the Advisers:

The family were able to view the dedication and commitment by the advisory term first hand. As a result, the family decided to retain the two firms as family advisers between generations. In fact, the sons were so impressed with this level of service, that they moved all their financial service needs to the 2 firms.


Following the successful outcomes of the process, the planner and the accountant decide to form a strategic alliance to build an aging client collaborative strategy on all their family business/ professional clients. The process built a new level of respect and trust between the 2 firms which will last between generations adding to practice profitability and longevity.

 

Research indicates that in many practices, a large propotion of clients are “baby boomers”. These clients need post retirement strategies. When they do retire and pass on, practices are left with large revenue gaps that can be minimised by introducing ageing client strategies. Estplan’s Ageing Client Series aims to enabling advisory practices to introduce a strategy that will generate positive results. 


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