Would You Use Your Parents’ Financial Advisor if They Passed Away?

7/11/16

by Michelle Perry Higgins


cfa

The United States is on the verge of the largest wealth transfer in the country’s history. In the next 35 years, $40 trillion will be handed down to Generation X and Millennials as the Baby Boomer Generation begins to pass.[1] However, this transfer may be a difficult process fraught with complications if a strong relationship is not built between a financial advisor and their parents’ children during the parents’ lifetime.  According to a study done by Investment News, a whopping 66% of children fire their parents’ financial advisor after they’ve inherited their parents’ assets.[2] This is not surprising considering that 75% of clients said their children had never met with their advisors.[3]  The failure to build a relationship between the children and the advisor may be detrimental to your family’s finances.

To avoid these complications, Baby Boomers need to ask themselves:

  1. Have I met with an Estate Planning Attorney in order to get my estate plan documents completed?
  2. Are all documents detailing my financial, estate and personal affairs safe and secure in a single easy-to-access location?
  3. Are my beneficiaries aware of my financial plans?
  4. Have my beneficiaries met with my financial advisor in order to become aware of my financial wishes, when I pass?
  5. Are my beneficiaries capable of handling their inheritance after I pass?

Without answering these questions, many family members may be leaving their beneficiaries in an extremely stressful situation. At a time when loved ones should be mourning, they will be franticly trying to figure out, “Who is managing Mom’s assets, and can I trust them to now manage my inheritance?” This is a situation you want to avoid if possible. So before things get to this point, you should strongly consider bringing your heirs into meetings with your financial advisor.  This process not only acquaints them with your financial goals and wishes, but improves their financial literacy.

Questions Generation X and Millennials should ask themselves:

  1. If my parent(s) passes away tomorrow, do I know whom to contact in order to make the proper financial arrangements, in concert with their team of advisors?
  2. Am I aware of the location of my parents’ estate plan and supplementary documents detailing their financial wishes?
  3. Have I spoken with my parents’ financial advisor about what happens when they pass?
  4. Do I know how to handle and properly invest my inheritance?
  5. Do I trust my parents’ choice in financial advisors?
  6. Will I continue to use my parents’ financial advisor after I receive my inheritance?

It is just a matter of time before the Baby Boomers, Generation X and Millennials will need to answer these questions. Baby Boomers should open this dialogue with their families sooner rather than later.   If your financial advisor has not already offered to meet with your children, ask if you can bring them to the next planning meeting.   By making your children a part of those financial conversations, you can prepare your family before the moment comes and remove an additional source of stress from an already stressful situation.

 

For Generation X and Millennials, finding a trusted financial advisor is the foundation of effective financial planning, and I recommend starting with your parents’ advisor. By establishing that relationship through being active in your parents’ financial planning, you will have in place a financial advisor who you can trust for counsel when you are most vulnerable. A strong relationship allows for greater trust between advisors and their new clients so that they may work together to make smarter financial decisions.

[1] http://www.thinkadvisor.com/2016/03/01/how-advisors-can-stop-losing-clients-heirs-as-clie

2 http://www.investmentnews.com/article/20150713/

FEATURE/150719999/the-great-wealth-transfer-is-coming-putting-advisers-at-risk

3 http://www.thinkadvisor.com/2016/03/01/how-advisors-can-stop-losing-clients-heirs-as-clie