Estate planning forges love triangle

There is an unashamed love-hate relationship between financial planners and accountants, with a mutual dislike by both parties towards solicitors.

However, despite their parallels of affection, nothing brings these three foes together better than death — particularly when estate planning is involved.

But it seems that within today’s financial services industry, there is a general sense of confusion over who — financial planners, accountants or solicitors — is in charge when it comes to estate planning.

The confusion and uncertainty that is a part of the divide of responsibility in estate planning between these three professions is shared by Macquarie’s technical manager David Shirlow.

There are obvious shortcomings with all three groups in terms of the type of complete service they can provide estate planning clients.

Planners and accountants, for example, are unable to provide legal advice, which is an integral part of estate planning.

Solicitors, on the other hand, have generally been reluctant to develop new areas of business and pursue estate planning as an area of expertise. As a result, estate planning (as with accountants and financial planners) is just one service they provide.

“Historically, my perception has been that there is a chasm between the planner and the solicitor. Partly because planners would not want to move into the area of legal advice because of professional indemnity insurance,” Shirlow says.

Shirlow also believes that, in some cases, there may be a lack of recognition of the increasing importance of superannuation by all parties, and the positive effect this has on the need and demand for proper estate planning.

He says superannuation benefits now form a major part of many estate assets, and the distribution of those benefits on death need to be addressed in the context of the estate as a whole.

Shirlow says this can lead to a dangerous situation where superannuation is not integrated into effective estate planning.

“This can easily result in an ‘advice stand-off’, where the super element of estate planning may be addressed in isolation or, worse, not at all,” he says.

According to RetireInvest technical strategic manager Jennifer Brookhouse, the onus to find a solution to close the widening gap between planners, accountants and solicitors with regards to estate planning lies in the hands of planners themselves.

This is because it is almost impossible for a financial planner to avoid working with solicitors and accountants when dealing with issues such as estate planning.

“Solicitors don’t want to be involved in risk business, or set up a trust structure. I also think under the FSRA [Financial Services Reform Act], greater onus is placed on financial planners providing the right advice.

“Financial planners need to take a further step than just asking if a client has a will. What we’ve been looking at is establishing a relationship with a range of solicitors,” she says.

Brookhouse says it is a natural extension for financial planners to build relationships with solicitors. She says financial planners have to appreciate that there are certain areas their knowledge doesn’t stretch to, and this is where solicitors can add value. Planners also need to develop relationships with accountants for the same reasons.

Echoing Brookhouse’s point is Count Wealth Accountants, technical services consultant, Craig Dangar who says financial planners don’t seem to realise that solicitors play an initial, but crucial part, in the estate planning process.

“Solicitors have quite a valid role in estate planning affairs. At the initial stages, solicitors might have a major role. Any of the documentation that is required needs a solicitor to draw it up,” Dangar says.

“The adviser should be referring the client to an accountant for tax advice. However, the reality is quite fractured. A lot of advisers won’t touch estate planning, and a lot of clients are reluctant to disclose information to planners [about legal matters]. A lot of them [clients] don’t understand estate planning or don’t want to understand it. It can be quite a simple area, but most people just don’t do it,” he says.

So, if clients and some advisers are shying away from estate planning, are there really opportunities for financial planners to enter estate planning?

Brookhouse says planners need to look at estate planning not as a new opportunity, but an added service within their existing processes.

“Estate planning is not something that is added on, it is something that fits into the process. The questions that financial planners would usually ask a [prospective client], would just need to be asked in a different way, so the estate planning objectives are covered. Also, the recommendations of the planner and the recommendations of the solicitors could work together to reach a common goal,” she says.

Dangar also believes there are opportunities for financial planners. He says planners need to look at the bigger picture because estate planning, if done properly, could mean clients stay with them 80 years after their death.

“It’s quite important to understand the importance of estate planning, and also that it is quite a lucrative area if you’ve got it over the long-term. However, planners wanting to provide estate planning need some form of professional training. Forging a relationship with estate planning specialists would be ideal,” he says.

Dangar says he is sceptical about the establishment of in-house estate planning teams, given the nature of the relationship between financial planners and accountants. However, he says if it could be done, it could prove to be quite lucrative.

“If you could do it, you would attract the high-net-worth clients,” Dangar says.