Working with Inherited Wealth Clients, Part 2

Continuing with Kiersted’s account of her befuddlement in her trust officer’s office (see part 1 of this blog post from The Inheritance Project): “Sometimes I’d actually prepare a question beforehand, in the hope of recovering some credibility in his eyes. ‘What is my stock-to-bond ratio?’ was one of my standbys.

“Unfortunately, after I’d tried the same question at several meetings, he finally blinked and said, ‘That is what I just explained to you, dear’” … Now I will take up this subject of heirs not being able to understand what their financial advisors are telling them. I myself have experienced this same kind of befuddlement a number of times. But I was always too embarrassed to admit I didn’t understand.

Kiersted explains: “It can be daunting for advisors to appreciate how daunting shop talk can be to the uninitiated. Even fairly simple concepts can be obscure if the advisor indulges in ‘financese.’

“Many heirs find it easier to make financial decisions when they are presented with the human consequences of their estate planning. . . . If you explain to them that the purchase of a second home will mean that they won’t be able to gift their children as generously as they might like, they will see their choices in terms that make sense to them.”

Another sage piece of advice from Kiersted is to ask clients, “ ‘What exactly do heirs want from you?’ They are apt to be looking for a financially-oriented response. So they may say, ‘I am more interested in income than growth,’ or ‘I want to set up a trust for my children.’ Yet what such clients really want may go beyond the scope of purely financial advice and services. Perhaps they want a sounding board for life decisions, as well as financial ones. Perhaps they are looking for a mentor—someone to educate and support them as they seek to understand their wealth. Or perhaps they want a friend who will join them for a drink.

“It is incumbent upon financial advisors to find out exactly what their clients are after, and to decide whether or not they [the advisors] are comfortable fulfilling these roles. Taken seriously, this first step of articulating the expectations and limitations of both parties will foster an atmosphere of mutual respect and avoid a lot of confusion down the line.”

What else do your inheritor-clients need from you? The short short answer is: respect, patience, and empowerment. This is a tall order, but it is do-able.

 Respect: “Since many heirs are targets if envy, resentment, and even hostility, they often become acutely sensitive to the judgments of others. It is often not at all unusual for heirs to detect a kind of contempt in the eyes of advisors with whom they work.” [Editor: Speaking from my own experience interviewing heirs, I have heard several accounts about this kind of advisor. If advisors have not done their own personal work, they may download their unexamined resentments onto their clients—a painful situation for heirs to find themselves caught in. They come looking for help, but all they get is contempt.] “Advisors need to be aware of these dynamics. When they identify and challenge their personal biases towards heirs, they can communicate an attitude of openness and respect for their clients.”

Patience: “Since some heirs are easily overwhelmed by financial matters, the prospect of tackling too much at once can be frustrating for them. Sharon Rich, a financial planner in Belmont, Massachusetts, remarks, ‘I advise breaking everything down into small manageable tasks. … Scale it down to a list, with five items that [they] can accomplish within a reasonable time frame. Assure your inherited-wealth clients that they don’t have to hide their confusion and that they can ask a question as many times as they need to.’”

“The following questions [directed to advisors] may help them promote healthier, more satisfying relationships with [their] inherited-wealth clients.

Empowerment: “As ironic as it may seem, heirs often feel inadequate and powerless, particularly when it comes to money. Smart financial advisors will be aware of this and are careful to do what they can to strengthen their clients’ confidence and understanding.”

“The following questions may help financial advisors to promote healthier, more satisfying relationships with their inherited-wealth clients:

1. What are your own assumptions about wealth?

2. How do you feel when you can’t understand technical language?

3. Are you sure you know what kind of information your client wants?

More could be said on this rich (I couldn’t resist the pun) and complex subject. I recommend reading this short and clear  $1.00 booklet.