How should advisers tackle end of life planning with clients?

It could also be said that those who consult their financial adviser about what to do with their assets after they have died is “fully prepared to die at any time”.

For so many people, confronting the prospect of one’s own death is not only hard to do but can be quite distressing.

However, it is a conversation that advisers will need to have with all of their clients at some stage during their financial relationship.

If the client does not bring up the conversation themselves about end of life planning, then it will be up to an adviser to broach it with them.

Tim Bennett, head of education at Killik & Co, says: “End of life planning is not something most people want to have to think about, for fairly obvious reasons. 

“As a result, many families bury their heads in the sand and try to ignore it.”

But he points out: “The problem is that this merely defers difficult but important decisions that need to be made, ranging from the provision of the best form of long-term care, to how someone’s assets will be distributed on death.”

Adviser wisdom

This is where the adviser comes in.

As Mr Bennett acknowledges, they “can help in a number of ways, whether rationalising and consolidating what may be quite complex, messy, or even forgotten accounts, to helping with key documents, such as powers of attorney”. 

He also notes that having a single point of contact when dealing with financial matters such as this, can be useful. 

“Being unbiased, they [advisers] may also reduce the emotional burden that can be created when key decisions are either ignored, or left to family members who may feel daunted by the responsibility, or may not be in agreement, or even regular contact, with each other,” he suggests.

Henny Dovland, business development manager at Time Investments, agrees the subject of death and leaving a legacy, is “sensitive”.

“Nobody likes to admit they’re going to die,” she observes.

“It is definitely one of the areas where the earlier advisers can start having conversations with clients about inheritance tax and strategies, the better, simply because the earlier people start making proactive steps to arrange their estate in a sensible, tax efficient manner, the smaller the individual decisions are, and the more different options are available.”

Wider family

For some clients, it may take them a while to want to address the issue of what happens to their estate and finances when they pass away.

She concedes: “It may take years before clients actually do something. But it’s planting those seeds and addressing it at regular reviews and then also thinking of your client as part of a wider family.”

Clients who are struggling to acknowledge their own immortality may find that an easier way to deal with these issues is to think about who from their family is set to benefit from the passing on of assets when they die.

“Nobody puts inheritance tax planning strategies in place for their own benefit, it’s always for the benefit of somebody else. 

“Trying to engage with the wider family, building a relationship with the beneficiaries, those who are eventually going to inherit, and thinking about it as intergenerational planning,” she emphasises.

Ms Dovland points out this may mean inviting family members to a client meeting about end of life discussions.

“It does help open up that conversation around what is the situation, what has been done and how can we help make it a family decision, rather than an individual decision,” she explains. 

“So, engaging with more than one generation of a family, I think, is absolutely crucial for advisers to try and open up those conversations.”

Joe Roxborough, chartered financial planner for Ascot Lloyd, suggests a similar approach when considering how financial advisers tackle the subject of end of life planning.

He asserts: “Although we all know that death is inevitable, truly internalising this fact and putting a plan into action is beyond most of us, even with the best of intentions.

“The first step advisers should take is to shift the focus away from the client, and onto those to whom they would like to bequest. This gives the client a focus for their plans, i.e. the needs of their loved ones.”

He continues: “As with all financial planning, the objectives of the client are paramount. This can be difficult, as it is necessary to plan to provide for the client both in life and after they are gone, which is tricky as we never know exactly when that may be.”

Mr Roxborough proposes a longer term financial plan of regular gifting alongside spending and inheritance tax (IHT) reduction, where possible, is usually the best way for most investors to proceed.

“Most people’s investment pots did not develop overnight; nor should they be decumulated in such a fashion.  

“A gifting and IHT mitigation plan can be made over the forthcoming decade, for instance, with a term assurance plan to broadly match the period involved to pay any tax bill should the worst happen,” he says.

Scott Gallacher, chartered financial planner at Rowley Turton, suggests the particular issues an adviser will need to help their client sort out are wills, lasting powers of attorney and trust arrangements, “along with simplifying clients’ affairs to make matters easier for the executors in due course”.

Femi Folorunso, a consultant at Mattioli Woods, explains: “It is always essential clients make provision through a will to record their wishes of how their assets should be passed on.

“We feel it is equally important to have the appropriate insurance cover to meet care costs, such as in the case of someone developing a terminal illness.”

Mr Folorunso says: “Therefore, we ensure we have discussions with clients as early as possible during the financial planning process and assist them through our in-house will writing service. 

“It is also paramount clients record their views, preferences and priorities about their future healthcare and/or financial decisions should they ever become incapable of making decisions later in life.”

Vulnerable clients

Yet, it could be another 30, 40 or even 60 years after putting a plan in place that a client eventually passes away. 

This means it is likely that their end-of-life arrangements will need to be regularly reviewed throughout the duration of their life.

During their later years, the client themselves is likely to become more vulnerable.

Knowing how to communicate with vulnerable clients is part and parcel of being an adviser, and it is also why encouraging clients to make important end of life decisions early, when they are still able to make those decisions for themselves, is advisable.

“Assessing and defining the needs of vulnerable clients has long been an issue in the financial services industry and remains an important topic today,” acknowledges Stuart Wilson, channel marketing director at more2life.

“Advisers need to ensure they are aware of the implications of advising potentially vulnerable clients and broadening their understanding of the issue.

“This is especially true for advisers operating in the later life lending market. For example, the most popular age bracket to take out equity release products is between 65 and 74, and all of these customers are deemed to be vulnerable by the FCA.”

In some instances, an adviser will not have the specialist knowledge to deal with certain aspects of end of life planning themselves.

But as Mr Gallacher notes: “Good financial advisers know their clients better than almost any other professional and are ideally placed to bring together all the elements – solicitor, accountant, financial products – that their clients need.

“Some other professionals (accountants and solicitors) can be guilty of being order takers, arranging the requested solutions without really knowing the client. We’ve often seen potential issues created by solicitors, in particular, simply taking the client’s instruction.”

He recalls: “In the worst example, the potential inheritance tax on one estate would have wiped out one side of the family’s inheritance due to a standard worded will and the solicitor’s lack of awareness of the impact of any existing family trust.”

He thinks advisers offer a valuable service when it comes to the sensitive matter of coming to the end of one’s life, and that is “delivering honest advice and not being afraid to address the issues or challenge clients”.

He adds: “Tact is clearly needed but not at the expense of avoiding the issues.”

eleanor.duncan@ft.com