Is Your Career About to Be Repealed? - Part II

Is Your Career About to Be Repealed? - Part II

Estate Tax Reform
Article posted in Legislative on 18 May 2001| comments
audience: National Publication | last updated: 18 May 2011


In last week's edition of Gift Planner's Digest, Scott Fithian discussed how estate tax reform will require planners to change the way they do business. In this continuation of his article, he describes how to motivate clients to take action in this new planning environment.

by Scott C. Fithian

Following is Part II of a two part article. Click here to go to Part I.

Client Motivation

In order to address the issue of client motivation, it is important to create the appropriate context. Let's face it, even with the transfer tax as a motivational force, people endlessly procrastinate. This is particularly true as it relates to estate planning. Procrastination and inertia are the norm rather than the exception. The statistics indicate that seven out of ten people die without a will. How many people do you think die without an effective estate plan? I would venture to say too many. The problem has always been, and will always be, overcoming procrastination and inertia.

Why do wealth-holders procrastinate?

To overcome procrastination, we must first understand its root cause. Why do individuals procrastinate when it comes to wealth and estate planning? Consider the following:

  • Estate planning is a difficult topic.

  • Clients fear a loss of control.

  • Wealth-holders face numerous planning dilemmas.

  • Many wealth-holders suffer from financial indifference.

  • Many wealth-holders see the process as unnecessarily complex.

  • Advisors use too much jargon.

  • Emotional barriers often interfere with rational decisions.

  • Today's families are more complex.

  • Advisor bias creates confusion and conflict.

  • Uncertainty about the future.

  • Fear of ending the game.

Each of these issues adds fuel for procrastination and increases the probability that indecision and frustration will dominate the process.

Three Motivational Techniques

In order to explore how tax reform will influence client motivation, let's consider how advisors motivate wealth-holders in the present tax environment. In the face of procrastination there are three basic approaches for motivating wealth-holders into action. Let's consider the implication of each.

The Anxiety Model: An approach based on fear

The first approach is to increase the pain of procrastination. With this approach, the advisor creates anxiety regarding the results of the current plan. The expectation is that the anxiety will lead to fear and the fear will lead to action. A negative stimulus-- TAXAPHOBIA--is used compel the client to plan. Because fear is a natural stimulus for action, in many cases it works. As a result, the temptation for advisors to use such an approach is significant.

The Golden Carrot: Have I got a strategy for you!

Advisors often attempt to help wealth-holders establish objectives by considering the appropriateness of various strategies. They fire one idea after another into the client's mind and then watch and wait for reactions--good or bad. Invariably, most people end up with exploding headaches as a result of the complexity and confusion. Not only did they not understand the fifth strategy, they did not understand the first. Sometimes this takes place in a single meeting and sometimes over the course of months or even years. The advisor continues to present a sequence of strategies. Each strategy is designed to resolve an assumed problem.

Making things even more complex, wealth-holders are often barraged by multiple advisors with different strategies, differing objectives, and tools that have been designed to solve problems that have not yet been clearly defined. It is important to note that wealth-holders do not necessarily object to this focus on strategies. In many ways, they actually enjoy it, even if they don't understand it. The reason should be obvious. While evaluating the benefits and features of various strategies, wealth-holders are not forced to make any decisions. Each strategy appears like a lifeboat floating on the surface of the water, providing temporary refuge from the decisions lingering beneath the surface.

The Confidence Model: An approach based on clarity

Over the past several years, a new approach to client motivation has begun to evolve. The goal is to reduce anxiety and build client confidence. In this case, a positive stimulus--CLARITY--is used to compel the client to plan.

This approach is based on a simple premise. If the client is not making a decision, there must be a reason. The values-based approach suggests that careful discovery will result in clarity. Clarity will provide the client with the confidence to take action.

The focus of the process is to achieve clarity. Only when wealth-holders achieve clarity will they move forward with confidence. Likewise, only with client clarity can advisors effectively introduce solutions with confidence.

Clarity plus competence equals commitment

Ultimately, procrastination boils down to a single root cause: a lack of clarity. The reason that wealth holders procrastinate has little to do with motivation. Quite simply, they lack clarity. Only the right balance between clarity and competence will provide your client with the confidence necessary to make a commitment to a specific set of desired planning outcomes. Faced with ambiguity the easiest course of action is to do nothing. Unfortunately, that is precisely what many people do.

Imagine that you required a major surgical procedure. How would you respond if the surgeon was clear about which procedure to be performed, but lacked competence as a surgeon? Would you go "under the knife?" I suspect the answer is no. Would you feel any better if the surgeon was competent to perform the procedure, but lacked clarity regarding your particular situation? Wealth-holders must have clarity with respect to what they are trying to achieve, and believe their professional advisors are competent to help them achieve it.

There is one proven method for increasing a wealth holder's confidence. Provide clarity. Only with clarity can a wealth holder move forward with confidence. It is important to emphasize that I am not referring to clarity about products and services. I am referring to clarity regarding:

  • Their present situation and the ramifications of indecision. Where am I now, and what will happen if I do nothing?

  • Their key goals. What exactly am I trying to accomplish?

  • Their values, attitudes and preferences. How do my values, attitudes and preferences affect my decision?

  • Their unique journey. What past events and experiences can guide me toward the right decision?

  • The competence of their advisory team. Can these advisors actually deliver the solution I want?

  • Their strategy risk tolerance. How much risk am I willing to take to achieve the desired outcome?

  • Their complexity threshold. How much complexity am I willing to accept along with the desired outcome?

  • The economic, tax, and social climate in which the decision is being made. What external factors impact my decision?

As I pointed out earlier, clarity without competence is not sufficient to generate client commitment. Clarity only leads to action when combined with a competent advisory team. Competence falls into four general areas:

  • Clarity Competence: The ability to understand, acknowledge and accept the client's desired planning outcome.

  • Relationship Competence: The ability to establish trust, instill confidence, reinforce, and protect important relationships.

  • Technical Competence: The ability to develop, find or create strategies that accomplish the client's desired planning outcomes.

  • Management Competence: The ability to manage a planning cycle to an effective and timely conclusion.

Remember that effective planning comes from a combination of clarity and competence. It is not driven by our tax code or the strategies that exist at any given point in time.

Making the transition

For all advisors, maintaining a sustainable competitive market advantage is a primary concern. In wealth and estate planning, this often means staying abreast of the latest and greatest planning techniques and strategies.

Most advisors will agree that establishing clear and concise objectives is fundamental to effective planning, at least in theory. In practice, a majority of effort is devoted to plan design with a secondary emphasis on plan implementation. Far too little time is spent in developing objectives. This theoretically important area of planning seems to be viewed as a necessary evil by wealth-holders and advisors alike.

This is not to say that most plans are developed without objectives. The problem is with how those objectives are established. In most cases, the origin and appropriateness of the objectives are questionable. In reality, wealth-holders have little to no idea about what can be accomplished in estate planning. They have no concept of the possibilities. They are not aware of what other people in similar situations have done. As a result, they look to their primary advisor for advice because, after all, the advisor is the expert.

Herein lies the problem. Competent advisors are comfortable dealing with objective technical planning issues within their respective areas of practice. Drafting legal documents, identifying strategies, evaluating insurance products, defining investment risk tolerance, or analyzing alternative financial outcomes are within familiar territory. Advisors generally are not comfortable managing subjective areas of planning, such as dealing with emotion, understanding family values, or managing conflict.

In their defense, most advisors have received minimal training, if any, with respect to these less technical issues. They are taught the technical areas of planning, strategies, and products. They are taught to be objective or they are taught to sell. They are not taught to probe, listen, and empathize.

To see what advisors focus on at any point in time, review the agenda for any major industry conference. The majority of time is devoted to technical issues or sales issues. What new strategies can I learn? How can I sell more insurance? How can I raise more money for my organization? How can I gather more assets?

In the last few years, this trend has begun to shift modestly. However, the industry has a long way to go. Although tax reform is likely to accelerate the shift toward values-based client-centered planning, advisors are quick to return to their old ways.

We are at risk when we are in front of wealth-holders, particularly when other advisors are present. In these situations, natural survival instincts intervene and most advisors fall back on what comes most naturally to them--strategies, tactics and tools. Our future depends on our ability to resist this temptation, focus on clarity, and shift our focus from taxes to individual and family values.

Building confidence through Values-Based Planning

Values-Based Estate Planning is a step-by-step process that helps wealth-holders define and express their values and objectives regarding wealth. It is the ultimate client-centered approach to planning.

Values-Based Estate Planning: A clearly thought-out program, based on principals, standards and qualities considered worthwhile, designed for the accumulation, management, protection and transfer of everything one owns.

Does this definition sound familiar. This is the same definition we discussed in the first section of this article. As the definition suggests, the process is profound yet simple. Through this process, wealth-holders gain confidence as their financial affairs and personal values become aligned. By helping wealth-holders discover what is truly important to them, you will deepen your relationships to unprecedented levels.

Rather than focus on wealth, this approach asks clients a simple question. If you could do anything you wanted to with your wealth, what would you do? The client's job is to answer the question. Your job is the help them achieve it.

In this context, an effective estate plan allows a client to:

  • accumulate and maintain sufficient resources to protect their financial security and maintain their desired lifestyle.

  • transfer what they have, to whom they want, when they want and the way they want.

  • distribute their social capital in a manner consistent with their personal values.

Distinguishing beliefs

Below is a list of beliefs that I conclude distinguish my firm and our planning process from other advisory firms:

  • The solution is never the solution. The solution is enabling people to think clearly and confidently about the problem. By thinking clearly and confidently about the problem, wealth-holders gain liberty in selecting and applying appropriate solutions.

  • Find the place of most potential. Every planning cycle begins with an inventory of dangers and opportunities. These dangers and opportunities are categorized by their importance and urgency. From this list, the place of most potential emerges.

  • Start at a different place. Most planning is focused on strategies, tactics and tools. Although these are essential elements of planning, their focus is below the planning horizon. Effective planning requires you to start at a different place, above the planning horizon. By focusing on mission, vision, values and goals, you will arrive at the place of most potential.

  • It is not about the plan, but about the planning. The true value of planning is not the plan. It is the process of developing the plan in which your true vision for the future emerges.

  • Successful planning occurs when a trusted and competent advisor helps you to develop sufficient clarity to commit to a desired set of planning outcomes.

  • Focus on clarity. The end result of any planning process depends entirely on the level of clarity attained at the beginning.

  • Focus on what your clients value, before you focus on the value of what they own. Most plans begin and end with the numbers. Begin by discovering what is important to the client and end with a plan that reflects it.

  • If you do not know where you are going, any path will take you there. In any of life's journeys, it is essential to know where to begin, where to end, and where you are at any point in time. To achieve this, always operate under the guidance of a fully integrated model and unique process.

  • Discovery is the transformation of information into understanding. As one considers their legacy, personal history influences your choices. In order for any advisor to meaningfully serve a client, they need to know about non-financial as well as financial assets. In this regard, an individual's life story and the lessons they have learned contain immeasurable value in making appropriate planning decisions.

  • Protect your goals in priority order. Three levels of a pyramid reflect the client's hierarchy of financial objectives as they relate to the accumulation, preservation, use, and distribution of wealth. The primary objective at the bottom level is the client's need to establish and maintain financial independence. The middle level addresses the client's desire to leave a family legacy. At the top of the pyramid is the client's wish to make a difference--to have a positive impact on society through a social capital legacy.

  • A talent scout is a critical member of a virtual planning team. Strategies, techniques, and tools evolve and subsequently become extinct as the social, economic, and tax climates change over time. In addition, each new cycle of evolution brings a new level of complexity. In this rapidly changing environment, it is more important to know where to find an answer than to try and have every answer.

  • Protect important relationships. It is essential to identify and build on the strength of existing personal and professional relationships whenever possible and appropriate.

  • Focus on team management as well as team competence. A poorly managed team will likely produce a bad plan. A competent, but poorly managed team, will likely produce a bad plan and a very high cost.

  • Focus on the goal, not the means of achieving the goal. The most essential task for a client in selecting appropriate strategies is to understand what the strategy is designed to accomplish, not how it will be accomplished.

  • Optimize every planning opportunity. Although financial decisions are often focused in a specific realm of importance, the consequences of each decision are measured across multiple realms of importance. The objective is to optimize every planning decision.


    So, is estate planning about tax? I DON'T THINK SO. Regardless of the tax environment in which we practice, the most effective and appropriate way to motivate wealth-holders is to help them carefully define their goals.

    Many advisors have already begun the transition towards this new approach; however, the repeal of the transfer tax will certainly accelerate the process. This may be frightening at first; however, the end result will increase our ability to motivate wealth-holders to plan. It will also be more rewarding. As I said in the beginning, regardless of whether the transfer tax system is actually repealed, the mere possibility offers a tremendous opportunity to reevaluate our priorities and evolve as an industry. So I ask you again, are you ready to evolve?

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