Estate planning inertia: How IFAs can help plug the gap

While death is inevitable, delays, disputes and unintended consequences in estate administration can be avoided with forward planning, writes Caoilionn Hurley. Here she explains how IFAs can help clients deal with estate planning inertia

The current crisis has forced us all to think more about our own and the mortality of our loved ones.

According to research by deVere Group, will enquiries for solicitors are up 75%, reflecting the deep concern in our communities about the threat of coronavirus.

But when the current crisis passes, there will still be a real need to address the underlying issue – estate planning inertia. IFAs can and should help to plug this gap in legal estate planning provision.

Typically only half of people who are married or in a civil partnership in the UK have made formal legal arrangements for their assets in case of incapacity or death. I could rattle off many more statistics to support the point that engagement with legal wellbeing is at unacceptably low levels. In business, we would categorise our concern as ‘outside risk appetite’.

Fundamental misconceptions

A key contributor to inertia in legal planning is that there are fundamental misconceptions about how the law works. Unfortunately, the law does not always work in the way most people assume it will.

Common misunderstandings arise in relation to lifetime gifts, joint bank accounts, shared properties, the intestacy rights of partners and children to name a few. This knowledge gap can leave people and their next-of-kin exposed. COVID-19 has jolted many people into a legal fact check and, as a consequence of their findings, they have begun putting legal protections in place.

Financial advisers work exceptionally hard on financial wellbeing for their clients. However, without the right legal protections in place, financial wellbeing can be undermined both in the lifetime of a client and after a death.

In recent research undertaken by Co-op Legal Services, 75% of IFAs responded that better estate planning support would improve client satisfaction, retention and referrals. However, currently, only 10% of clients work with their IFA on their will.

What accounts for the 65% gap? The problem is twofold.

Firstly, the topic of death is taboo, making clients and advisers alike uncomfortable. Many IFAs acknowledge that clients are often hesitant when it comes to discussing what happens to their assets after their death.

The present context is a reminder for clients of the importance of properly planning what will happen to their assets, either when they are unable to act on their own behalf or when they pass. This period of great uncertainty should be viewed as an opportunity for IFAs to strengthen their offering.

Client engagement is unusually high and minds are focussed. IFAs are in the business of building financial wellbeing, estate planning should be considered a vital part of that service as the right legal structures afford tremendous protection to an estate and a family.

The second reason many financial advisers miss out on the opportunity to provide legal estate planning is the technicality of the topic. From my own experience, I know that many people misunderstand how the law works in relation to incapacity and death. This can mean client’s end up confused and unclear about their own needs and requirements.

Technology

Technology is moving at pace and the opportunities it presents to democratise legal knowledge are boundless. I believe knowledge is the precursor to making the right choice of legal services. The right tools can also help financial advisers bring greater peace of mind to clients. By combing digital and legal information services into their approach, IFAs will be able to deliver integrated financial and legal planning for clients.

With trusted tools at your fingertips and the right approach, financial advisers can and should play a role in helping more people plan for the future of their wealth. While mortality will always be a difficult topic to first broach, the lens that is more relatable for clients is that of safeguarding their estate for loved ones through legal risk management and legal protection.

Now more than ever, I would encourage IFAs to deepen their relationships with their clients and build partnerships with legal providers. With a strong integrated offering, IFAs can, with confidence, prompt a conversation and then put protections in place to drive the right outcomes for the client.

We cannot prevent the inevitable, but we can prevent delays, disputes and unintended consequences in estate administration with a little legal rigour.

Caoilionn Hurley is managing director of life planning and legal services at The Co-op