Review of
Values Based Estate Planning
- A Step-By-Step Approach To Wealth Transfer For Professional Advisors
Scott C Fithian, Wiley , 2000, 271 pp.
Those of our readers who have far more years of experience in estate planning than I do will immediately recognize the usefulness of a book such as this.
Estate planning is more an art than a science largely because of human emotions. Particularly anxiety. People resist going outside their comfort zone. They avoid making tough decisions. Especially decisions th 22422y243w ey will not live to witness fruition of. This monumental work is designed to assist advisors in leading affluent clients to optimal plan implementation.
Clients can, and do, contribute to what the author refers to as 'eternal planning.' (After all is said and done, there is often more said than done.) Here are some reasons why: Clients may perceive estate planning as difficult and complex . Clients may fear a loss of privacy control and irrevocable separation from resources. Clients may not know which decision to make in a vast array of choices. They often believe this is the beginning of the end.
Advisors can, and do, contribute to eternal planning. In fact they are the main perpetuators of the process. Advisors often make assumptions based on past experience. They can have a propensity to be solution/strategy focused, offering ready made solutions when they haven't really determined the problem. They may seek to overcome client confusion with information overload or a tendency to oversell. If an advisor is hourly rate fee based he or she may draw the process out. On the other hand, commissioned advisors may try to close too fast. Often new advisors simply wonder what to do next. If the process stalls they may just move on to the next prospect . A values based planner seeks to manage client procrastination by a process. This book outlines an excellent process.
The values based estate planner seeks to understand what's important to the client. A step by step process assists clients in recognizing and expressing their financial values and vision before verifying what is currently in place or seeking to validate inconsistencies. Clients must first be comfortable with you and feel your empathy. Understanding the client is more important than the client understanding the advisor. Beginning with a computer generated illustration or projection is not where they need you to begin.
Seven principles of values based estate planning outlined and delineated in this book provide frame works for ensuring client values are central in estate planning.
Principle #1 Understand the hierarchy of planning objectives: A pyramid of three planning objectives provides a logical and orderly progression. The value clients place on financial independence, family legacy and social legacy are foundational.
Principle#2 Master the concept of social capital: This defines the impact of client wealth upon society. Social capital is wealth that will be distributed either as taxes or as charity.
Principle#3 Define the family financial philosophy: Wills and trusts describe asset distribution. A mission statement defines why. It is a written expression of values and vision.
Principle #4 Quantify financial independence: This answers how much wealth will be needed to attain and maintain financial independence for life.
Principle #5 Identify an appropriate family legacy: Through giving while living or as an inheritance clients are empowered to pass on 'value with values.'
Principle #6 Maximize the social capital legacy: Beyond their desire for lifetime financial independence and provision of a family legacy many affluent clients yearn for social impact. Clients make a social impact through taxation or by choosing their social capital legacy. It is easier to maximize their legacy when decisions are values driven.
Principle #7 Build a virtual planning team: The onus is on the advisor to network. Each contributing member of the advisory council will have unique abilities. The financial advisor should be excellent at helping clients identify their values and vision and oversee and integrate other professionals in prescribing the best estate plan.
Something the author calls the planning triage phase establishes whether or not the basis for a successful client/advisor relationship exists.
The legacy planning system exposited in this book constructs a successful relationship one step at a time. Values based legacy planning virtually eliminates paralysis by first gathering data, reviewing the current plan, establishing goals and objectives and developing observations. This is called the discovery phase.
The discovery phase identifies what is important to the client by using the four excellent appendices in back of the book. Encompassing some 63 pages, they are the meat of the book. The 'legacy interview' probes client past and present to identify client philosophy. The 'legacy questionnaire' leads clients to consider their preferences. The 'legacy goal profile' addresses the three key financial goals, independence, family and social legacies. The 'legacy blueprint' maps the destination under the current plan or lack of and the proposed plan's outcome.
Discovery is followed by verification and substantiation. Each identifiable problem has a specific strategy which combine to form a plan. Intensity decreases rather than increases with each step while building on the previous.
The mission statement articulates core beliefs regarding money and its intended use.
Acknowledgment of existing consistencies and inconsistencies The 'legacy positive focus table' addresses each and identifies progress made and progress required to bring the plan into line with the newly written mission.
Plan design, construction, and execution. Appropriate strategies are assembled into a plan focused on today's goals and mission statement.
The 'family financial philosophy,' or mission statement, unifies the wealth management and estate planning process in a number of ways. It provides a philosophical context. It stimulates clients to wealth transfer decisions that make sense to them. It articulates client values to heirs and tells them why assets are distributed in such a way. It prescribes whether the government or the client controls wealth distribution and balances government-directed and self-directed capital.. It allows clients to retain control of planning process. It clearly expresses client definitions of independence and legacy and appropriate amounts and determines to pass on 'value with values.' The mission statement transitions from advisor-centered to client-centered estate planning by helping advisors understand client intentions.
In conclusion, why should advisors integrate value based estate planning into their practices? For three reasons: 1. To promote and protect client relationships. Clients will perceive you as a counselor. 2. To generate gratifying results for clients both in quality and in quantity. 3. To create an edge in the marketplace for the advisor through possessing distinguishing features, such as the ability to forge deep and lasting client relationships enabling advisors to deliver their service.
Who should practice values based estate planning? Any professional advisor, financial or otherwise, who purposes to represent client interests above all else. Do you desire to provide advice and fulfill recommendations in tune with client articulated objectives? Do you have the resources which allow you to best do so? Personal integrity is the single most important factor an advisor must have. Having this book as a resource will enable you to do your best.
Values Based Estate Planning will ensure you put your clients at the center of and in control of the legacy planning process. The result will be an estate plan (which encompasses living and dying) built around your clients' core values. Resulting estate plans are consistent with client expectations and endears them to you for life.
-Reviewed by Tim Turenne, BA (Hons)
Freedom 55 Financial
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