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How to Manage Estate Planning Costs for Clients

19 min read
·April 16, 2024
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Hosts Anne Rhodes and Thomas Kopelman discuss how advisors can help their clients manage and reduce fees related to estate plans. The conversation highlights that, often, the biggest assistance and advisor can provide is to prepare their clients ahead of meeting an estate planner while also helping set expectations. While this can help streamline their time with an estate planner, they stress that quality is always paramount.

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Full transcript below:

Anne Rhodes: Hello everybody and welcome to another episode of The Practical Planner. Today I am the one who is opening, and so we have a very sort of hopefully an easy listen for you. I know the last episode with irrevocable trusts and businesses and all these trust acronyms was probably really dense and long. And so for this episode we thought we would give you some practical pointers about what you can do as a financial advisor to help control the bill when you are working with a client who is working with an estate planner. And so Thomas, today I'm going to start by asking you sort of as you help your clients navigate estate planning, either for just succession planning, like they're at death basic foundational estate plan, but also some of these more complex wealth transfer strategies and you have to coordinate with an army of advisors. What do you do? What are you seeing out there and what are some of your strategies?

Thomas Kopelman: I think you worded that really well without saying lower fees directly, because I think sometimes a lot of the advisors I talk to, everything is about fee compression and lowering fees and everything. But at the end of the day, you still want to work with a professional who's going to get the job done and get the job done well, like finding an estate plan attorney that's going to cost 1000 versus nine is really cool until that's a terrible estate plan and issues come about. So I think first and foremost level setting that quality is important and you want to pay for quality, but there still are ways for us as advisors to help reduce the fees that our clients are going to pay to the estate plan attorney, at least in my experience. And I think this really starts with first meeting I have with my clients is all about getting organized.

I need to understand their balance sheet, I need to understand their family, I need to understand their wants. And then from there I really focus on educating them on the benefits of each different type of thing. So I think if you start with the bare minimum of just getting a will in place or getting a revocable trust in place, I think it's just educating them on the differences between the two. Why one potentially could be better for the other. So when they walk into that first client conversation with the estate planning attorney, they're not like, I've never heard of the word revocable trust. Because I'm pretty much a flat fee advisor, but a lot of the estate planning attorneys are hourly. So the more questions you have, the less you know, the more that's going to cost and I think that makes sense to everybody. I think there's only so much you can do on that side of things.

You're still going to pay to move the business there, to do a deed transfer of your house. I think there's a lot more that we can do on the irrevocable side of things, because if you walk into the attorney's office and you've never heard of any of the different types of trusts, it is overwhelming. And so for us with our clients, we really start to walk through some of the strategies that could be impactful to them and why. And we do that twice actually. We still have a beginning one, here's the strategies, here's the potential impact, here's what this can do for you in the long term. Take some time to think about this, understand it, and then we'll sit down for the next meeting and answer questions about it for them. And so then when I call the estate planning attorney, I'm thinking about a recent case I've been doing this on.

I said, "Here's the client, here's what they want. Here's some of the strategies we're considering that we want to go through with you and help decide what are the best ones to do." Because for example, I had a client who I knew the estate planning attorney wanted to bring up irrevocable trust for the parents to set up, but that was never going to happen. The parents were never going to agree to it. They've already talked about it. We already had them facilitate that conversation. And they said, "Absolutely, that's not something that we really want to do." And so he just wanted to set up things for himself even though he had really wealthy parents. So instead of sitting through an entire hour long meeting of the advisor showing all the estate planning strategies the parents could use to benefit him, we didn't necessarily have to go through that time and do it.

So to me, I think it's really all centered around a lot of time gathering the information. So I think you can attest to this. The first meeting, if somebody didn't have an advisor sat down with you, it'd be all about, let me get to know you. Let me get to know your family. Let me know your business. Let me get to know your balance sheet, and then let's start educating, and that's probably the first three meetings. And so what we can do is we can condense down those first three meetings to potentially only one. And I think for some people like, well, you saved two hours. Well, we also saved hours of them gathering it and organizing it to give to them, which can maybe that reduces 20 to 30% of the cost.

Anne Rhodes: That's one of the pain points that I remember when I onboarded new clients. And let's be clear, my biggest referral sources were financial advisors. So the better I worked and coordinated with a financial advisor, the more likely they enjoyed working with me and saw me in action with their clients, and would then refer business back to us. So with the financial advisors that I got a lot of referrals from, it was like, we synced up, we hit a really good pace, but there's always that information gathering that a lawyer needs to do.

And so to the extent that the financial advisor has already done all of that once, why do it again? And this I have to mention by the way, that attorneys tend to operate in a pretty antiquated way. It's just the business. I think the profession, they're very reluctant because of different liability reasons and insurance and whatnot to adopt technology quickly. And so this is where, to be honest, I sent a PDF and very recently we made it fillable, which has even better than just a static PDF. But imagine if your clients have to sit through and fill out a static PDF, do they print it? Do they have Adobe Pro to be able to fill? You as a financial advisor, just the fact gathering stage could just really be helping your client.

Thomas Kopelman: I was going to hit on that a little bit deeper though too. Almost every advisor I know has financial planning software. So the tools we have to gather the info, my software has them link every account they possibly have. And then I have a vault that has taxes, company benefits, insurances, investment statements. So everything is gathered in a really easy way, where it's not like I give the attorney that login, but all of that is downloadable and be able to share it with them as long as clients give the approval, which of course they do. Every client wants you to handle vacation for them or like them.

Anne Rhodes: So because you might be more technologically forward than the attorneys you're partnering with, your tech stack, put it to work to reduce the bill for your client on the legal side of things. And of course there's technology out here, like wealth.com that can help you further reduce some of those costs.

Thomas Kopelman: But I think that's a good talking point to add too. All of our clients are entering things into wealth.com, so when they book a meeting with the attorney, the attorney can go through the software with them and that also saves a whole bunch of time.

Anne Rhodes: Absolutely. Something interesting that you said too is about setting client expectations and making sure that the first time that they hear about something is not necessarily from the person who's billing them by the hour, but if you just happen to know and have the comfort level to be able to speak to it, you can take that first crack for sure. So here's what I would say. I think that with the most successful financial advisors that I worked with, client management was also a thing, because let's put it this way, sometimes you have clients who just really like to ask questions, detailed questions. They really need to know what's in the boilerplate of their documents and they need a lot of hand holding and they're just constantly emailing. I'm sure everybody can think of a client that's a little bit like that.

And that experience can be just as frustrating for the client who's getting the $20,000 bill from the attorney at the end of the project, as with the attorney, because they don't want to charge $20,000 to do a basic estate plan. That's not what it's supposed to cost. And so then they have to reduce their own billing, go back to the billing department, get approval from the head of whatever their group is, their practice area, and it's just a bad experience for everybody.

And so in that case, sometimes it's helpful for you as a financial advisor to tell a client, "Listen, maybe I can interface with that attorney and take that burden off of you, because I know how you run your life. Let me take that on and make sure that you feel like you're set up," but without spinning the wheels of all the parties involved. So I'll tell you that that has happened a couple of times where when you have the financial advisor stepping and mediating that, it is really helpful as an attorney as well. The flip side of that to be careful about is the attorney-client privilege, and how all of a sudden you are almost stepping into the shoes of the client to impart their wishes.

So just making sure that when you're doing something like that, you're being the liaison, keep the client copied if you can, make sure that you have things in writing from the client. Because sometimes you don't want to copy the client, because what starts their wheel spinning, but at least that you have a trail for like, they instructed you this way and now you're going to go in and instruct somebody else. There were some clients we never even talked to because of the family office, and things just came straight through from advisors in their inner circle. And so there are some things to think about there too about the dynamic.

Thomas Kopelman: That makes a lot of sense. And I think if you're an advisor with a pretty good practice and you have some good attorneys that you refer to, most of the time they want to work with your clients. And so they'll have conversations with you and educate you without charging you. I've luckily had that experience. I have a bunch of great attorneys I talked to, they help answer questions. They've never once billed me for it. If they did, obviously that would be part of it. I think another way is there are flat fee attorneys. I've found some really good flat fee attorneys. It's not like whatever we do is $5,000, what we do is 10. But they give you at the start, "Hey, I got to know them. Here's what we're thinking we'll do. It's going to cost $15,000 or whatever." And so sometimes I think people just really like to know the cost going into things.

I think it's just kind of, "Hey, we charge $600 an hour. How many hours are you going to be?" "Well, really hard to say." "Well, could you give me an estimate?" "We really have no idea because it could depend on this, this, and this, and then this happens. You're like, okay, well that's really scary. So I'm going to say no." Even if 15,000 ends up being more than what it was, I think a lot of times people just like to know the number. Call it a day, it's planned for and that there isn't just a large unexpected expense.

So some of my clients have really liked that structure and working with those type of attorneys, same with financial advisors. Some are okay with AUM, some only want flat fee advisors. They know exactly how they're charged when they're charged, et cetera. So I think that's something good to know.

Anne Rhodes: And I will say two things on that. The first is I think that you're owed a quote, like an estimate. And sure the lawyer can couch it and be like, "Well, I still am going to bill by the hour or whatever." But you should be able to just put a number on it to just give you a sense for how efficient that lawyer is. Because that lawyer could be like a solo practitioner where every hour they work on your account as their billing rate, versus some attorneys start building some efficiency into their practice. They have paralegals, they have their own tech, how efficient they are. The billable hour can't substitute for that metric. And so I actually think as a bill of rights for the client, you're owed an initial estimate, plus anybody just wants to be able to budget. You guys as financial advisors, that underpins the very basics of what you're doing as a planner.

And so that's just another line item that goes into the budget. And lastly, I will also say don't assume, and I'm sure you know this, but don't assume that the wealthier your client is, the less sensitive they are to a legal bill. I think I was always surprised by this, but there were some clients who had so much money and they argued over every single billing block that I had on my invoice, versus a client who didn't necessarily like a mass affluent and who just was so pleased with the service, just never argued a bill, so you just never know.

Thomas Kopelman: That doesn't surprise me at all. Again, I've worked with a household, they're like a hundred million net worth and the nicest place they shop at is Target. They don't want to buy clothes anywhere nicer. And then you work with people who make $250,000 in... They're buying Gucci everything. So that does not surprise me. I think the only last thing I'll note is obviously a way to reduce fees for me and my clients is that I do pay for wealth.com and then that my clients, the ones that fit, do it through there. And then another one is a lot of times what I think is great planning for parents is your kids should have power of attorneys and medical power of attorneys set up, and I can just invite their kids to do that through wealth.com without it being a cost that would prohibit them from doing it.

Anne Rhodes: Well, thank you for that plug in, Thomas. Actually, it's interesting that you should mention that, because I remember having clients where the parents have done tens of thousands of dollars of planning to be able to reduce their own taxable estates and get things out. And then you ask, well, your kid is in their 20s and they're not married, they don't have kids. So if they pass away, something happens to them, all the assets that you just transferred to them come right back up to you, because of default intestacy laws. So you as a financial advisor sometimes can just bring that up and kind of see how if the client is open to actually taking on the bill for their kids to do their own estate planning, but with certain tools now it can be like you just need a basic plan for the kid. It does not need to have your dynasty trust in it or whatever else. They just need to pass assets to their siblings or somebody else, but not the parents.

Thomas Kopelman: Well, I think this was another really helpful episode. I know this was a big question that I had when I was starting to engage in we're the estate planning attorneys. I was very price conscious for my clients of like, you just started with me. You're paying all these financial planning fees, now we're going to have you pay estate planning fees. How do we at least make it the best situation you can? And I think this episode did a really good job of helping people understand that.

So again Anne, thanks for joining me. I love doing this podcast with you, and I've been getting really good feedback from people about how great it is. So hopefully we continue to just get more and more people listening and all the listeners that do enjoy this, the best way you can help us is share this on social media, like it, subscribe, and that would be really helpful. And then submit your questions or things you want to talk about to us. All right everybody, see you next time.

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