ELITE ADVISOR BEST PRACTICES

Thanksgiving Food for Thought

Our contributors share their thoughts about issues that will (or should) be broached during family gatherings this holiday season.

By Elite Advisor Report

Key Takeaways:

  • Extended family gatherings can be occasions of great joy and stress. Make sure your clients are protecting themselves.
  • With the right tact and foresight, the holidays can be a great time for clients and their families to address important estate planning, elder care, insurance and business succession issues.
  • Don’t let year-end deadlines fool your clients into making hasty financial decisions they’ll regret for years to come.
  • If clients (or family members) suffer from alcoholism, substance abuse or reckless spending, make sure they get the help they need ASAP from a qualified professional.

In a recent article for us, Scott Justice, Assistant Vice President and Senior Business Development Manager at AIG Private Client Group, illustrated five important ways that advisors can use their insurance knowledge to strengthen client relationships. According to Justice, “not all family offices operate in the same way. Some solely address the personal needs of a family, some operate independently as a business and others blend these approaches. Yet regardless of the structure, all family offices can face serious consequences if an unexpected event puts the family’s assets or reputation at risk.” Here are some examples that Justice shared of seemingly random snafus that can derail an affluent family’s peace of mind, especially during the holidays:

  • A family’s unoccupied vacation home was destroyed after a pipe burst and the leak went undetected for two weeks.
  • After a matriarch’s death, the family decided to sell her multimillion-dollar art collection, only to have it damaged during transit to the auction house.
  • A family was hosting a charity gala at their primary residence. During setup, a worker slipped in the pool area, sustained severe injuries and sued for seven figures.

See Family Office Risk Management for more from Justice.

Dumb things business owners do at year-end

According to Josh Patrick, CFP®, there are six cardinal sins that family business owners tend to commit at year-end:

  1. They buy equipment they don’t need.
  2. They pay bonuses because they had a good year.
  3. They rush into acquiring another business in order to beat a year-end deadline.
  4. They scramble to finish projects just because the calendar is about to flip over to a new year.
  5. They buy too much inventory, succumbing to year-end deal mania.
  6. They forget that a tax write-off still means you’re spending money.

If your clients and their kin are talking turkey about a significant year-end family business decision, Patrick urges you to remind them to be savvy and “think about your year-end purchases just like you would for one in April. If you need it and can afford the expenditure, go for it. Otherwise wait. You’ll be glad you did.”

Preventing financial and tax-related identity theft

As thoughts turn to use of online holiday cards, gifts and shopping services, remember this is also “the most wonderful time of year” for cyber criminals. As Blake Christian, CPA/MBT, explained in a recent two-part series for us, Financial and Tax-Related Identify Theft, over one-third of older adults and 22 percent of millennials fell victim to identity theft last year. “With the combination of billions of e-documents, server and cloud-based databases, and sophisticated hackers, this trend will likely get much worse in the short term,” observed Christian, who offered half a dozen great tips for advisors to use to protect their clients.

“As a financial advisor, you are on the front line of assisting clients with all things involving their financial activities, so you will likely be one of the first advisors to hear about any client identity theft issues,” noted Christian. “Being familiar with the various schemes, preventive measures and corrective actions will help build your client relationships further.”

Don’t let alcoholism or substance abuse tear your clients’ family-owned businesses apart.

Tom Hubler, president of Hubler for Business Families and an adjunct professor at the University of St. Thomas, observed that alcohol abuse can be devastating to any family, especially to business families.

“All too often, family businesses lack formal agreements between first- and second-generation executives—an unfortunate situation that’s only compounded when alcohol or other chemical addiction is a part of the family dynamic,” noted Hubler in a popular two-part series that we published this year titled Alcoholism’s Stinkin’ Thinking: Just Wine at Dinner. “Unfortunately, addiction is such a powerful influence that many, if not most, families (and individuals) would rather deny it exists than deal with the problem,” Hubler added.

Hubler explained that addiction can make people overly defensive, confrontational, and even bullying and irrational. “I have dealt with this often in my practice. Here is an example that demonstrates how dysfunctional it can be.”

Click here for real-world case studies and a Family Business Stress Test from Hubler.

Quality of Life, or Have Fun ’til You’re Done

Thanksgiving and other intergenerational family gatherings are a time of reflection about the past, present and future. With today’s medical advances, increased longevity has created a situation in which there can be three, four, even five generations of family members sitting around the table.

As San Diego-based fiduciary Marguerite Lorenz pointed out for us recently, it’s essential for advisors to help clients overcome their fear of estate plans and end-of-life decisions. No one enjoys talking about these subjects, but Lorenz explained that doing so the right way can substantially raise your relationship with clients and pay long-lasting dividends.

In a popular article series for us, Quality of Life, or Have Fun ’til You’re Done, Lorenz wrote that “each of us defines our quality of life by what makes our life worth living. When you understand your own choices, you are better able to help a client learn their quality of life requirements, and then the client is better prepared to protect and defend those very things (activities, relationships, experiences, etc.) that make life worth living.”

Conclusion

Enjoy the start of the holiday season with friends and family you care about most. Just remember that while the focus should be on enjoying good food, drink, football and reunions, you and your clients should use this time together to address what Tom Hubler calls the financial and estate planning “elephants in the room.”