What Is Legacy Planning?

Legacy planning – providing advice to intergenerational clients that extends beyond wealth transfer – is a critical strategy for retaining client relationships and assets for the long-term.

During the next several decades we will experience the largest intergenerational wealth transfer in history. Every year for the next 50 years, $1 trillion will pass from one generation to the next, according to Paul G. Shervish, a professor of sociology and director of the Center on Wealth and Philanthropy at Boston College.

Will your clients’ heirs turn to you for guidance and advice in managing the wealth they are set to inherit?  Unfortunately, most industry statistics currently indicate that the vast majority of inheritors will change advisors.

As such, advisors will benefit from a process-driven approach for navigating family dynamics and effectively building trust and confidence with the next generation.  They will also benefit from a process that empowers clients to address many of the non-financial aspects of wealth transfer and helps them to start thinking about the creation of a broader family legacy.

With more than a decade of experience in the financial services industry as both a financial advisor and business consultant to financial advisors, I’ve learned that creating a legacy involves much more than just transferring wealth or leaving an inheritance.

Why you should consider adopting “legacy planning” over traditional estate planning.

Most people generally dislike and avoid the topics of death and inheritance.  This is in part because of the potential for emotional and financial misunderstandings and conflict, which are very intimidating. Legacy is a more hopeful concept because it embraces and captures all facets of an individual’s life.  The Allianz AG (OTCMKTS:ALIZF) American Legacies study found that both boomers and those in the older generation were uncomfortable discussing the one-dimensional topic of leaving an “inheritance” but embraced the idea of leaving a “legacy” because it captures all facets of an individual’s life – including their family traditions and history, life stories, values and wishes.

Legacy planning, by nature, involves participants from several generations, whereas traditional estate planning often consists of a scenario where the estate attorney and the first generation work together to draft, establish and prepare estate-planning documents without involvement or discussion with successive generations.  It’s important that the preparation of the legal documents be left to a qualified estate-planning attorney, but as the trusted financial advisor you can still play a very important role by helping to facilitate important discussions between clients and heirs that develop mutual understanding.  The family should have someone facilitate multi-generational conversations and find ways to bring the family together instead of allowing potential conflicts to surface down the road.