Turning-Point Conversations: How to use important life events to refocus clients and deepen relationships

There are certain times in life that lend themselves to these clarifying conversations–when all of a sudden life planning (financial and otherwise) is no longer on autopilot. Your clients may or may not volunteer these big life moments to you, so it’s important to always stay curious and ask open ended questions so you can be a part of your client’s planning process when it matters most.

Sometimes, it’s as simple as taking the time to ask: How’s life? What’s going on for you and your family these days?

I spoke with Arielle Lederman to better understand how financial advisors can approach some of these weighty life events with their clients. Lederman is senior wealth strategist and advisor with AdvicePeriod, with a focus on ultra-high-net-worth individuals. She has a background as a trust and estate attorney that she makes use of to help her clients with financial and estate planning strategies.

Financial advice around marriage

Often when there’s a wedding on the horizon, it isn’t actually the client’s own wedding, but their kid’s wedding they’re planning for. But whether your client is preparing for their own wedding or a child’s (and especially if the client is ultra-high net worth), they’ll want to consider a prenup. This is delicate territory, but your responsibility is to your client, and you want to ensure his or her estate is protected.

The prenup will be written up by an attorney, and so it’s important for financial advisors to have good relationships with marital and estate attorneys (ideally both in your jurisdiction as well as in states like CA, NY and FL) so that you can refer the client to someone you know will do top-notch work. To the client, their work will be an extension of your work, because of the referral.

Another question to broach is whether the couple will be moving when they get married (especially if that move is to another state) as that will change legal and tax implications and other requirements.

Once the wedding takes place, check in with the couple to ensure they have all of their core documents in place: healthcare directives, powers of attorney and wills. It’s easy for clients to get caught up in the excitement of the nuptials and to forget about the basics – reminding them how important those documents are is a great service.

Financial advice around divorce

This isn’t as jolly of a topic as marriage, but divorce has a lot of financial implications. Although most of the hands-on work in divorce proceedings will be done by a divorce attorney, it’s a good idea for financial planners to walk clients through how a divorce might impact their estate.

“One of the things we can do is to go through the client’s existing trust structures and look at what the documents may or may not say will happen in the event of divorce. We can help our client understand what actions will trigger a change to the trusts in terms of who will continue to act as a fiduciary and who may or may not remain a beneficiary, which impacts what they have access to,” said Arielle Lederman. “And we can flag those triggers for their divorce lawyer to look at, so they have more visibility into the client’s world.”

Financial advice around the birth of a child

Before the birth of a child, ensure your clients update their will to reflect who they want to act as guardian in the event of their death. And once the child is born, it’s a good time to start considering educational planning. Should your client set up a 529 plan for college savings? (Hint: Lederman isn’t a huge fan of 529s for ultra-high-net worth clients in most cases, but they could be right for some clients.) Or perhaps they should consider a Crummey trust that would allow them to take advantage of the annual gift exclusion ($18k/year in 2024). Your clients also may want to keep in mind, as their child grows, that any money they give directly to a school is tax free.

Financial advice around kids approaching college

Once a client’s child is eighteen, the client can no longer make decisions around his or her healthcare. So, if a client’s child were to get seriously ill or in an accident, the parent would not be able to direct doctors and medical professionals and guide their child’s care. It’s a good idea for parents and kids to sign healthcare directives that allows parents to act as healthcare proxies in the event of an emergency.

Financial advice around major business events: IPOs, acquisitions

Significant business events, especially IPOs and sales, can have huge financial implications for clients. You’ll want to impress upon them that the sooner they can come to you with information around the event, the better, so you can help them prepare. There are a lot of factors to consider.

“When a client comes to you and says, ‘I’m selling a business,’ it’s time to ask questions,” said Lederman. “When are you selling? How is your business structured? Have you received a letter of intent? Is it being acquired by a SPAC? What’s the structure of the agreement? When was the last valuation – and can you use it for personal planning?”

Then, Lederman says, you’ll want to gauge your client’s appetite for estate planning as you determine the best course. Is this money they might need in the immediate future – or is it more than they ever expected? It may make sense to create irrevocable trusts for the spouse and kids, depending on the level of wealth event.

As a part of this conversation, you’ll want to understand whether your client is charitably inclined. If so, you may want to consider creating and funding a charitable remainder trust, which can have income tax deferral benefits on the sale of the business.

Financial advice when a client is sick, dying

It’s never easy when a client tells you that he or she is terminally ill, but as their financial advisor, you can provide them peace of mind by making sure their affairs are in order. First thing, you’ll want to verify that they have all of their core documents (will, power of attorney, healthcare directives) up to date.

Next, you’ll want to evaluate their assets and determine if there’s any action you should take while your client is still alive that will make it easier for the beneficiaries once he or she is gone.

“Look at the client’s existing grantor trusts,” said Lederman, “If those trusts hold low basis stock, but the client has cash outside of the trust, I would recommend swapping those so that the stock can get a step-up in basis at death.  Also, if the client has low basis assets in his or her name, it may be better to sell prior to death and take the loss while they’re alive, if possible.”

Another thing your client might consider is funding a revocable trust or transferring assets they want their spouse to have to a joint account, so that the spouse will have immediate access to it, and not have to wait through probate.

Financial advice when a client is moving states

When a client is moving states, they’ll want to redraw their documents in the local jurisdictions they’re moving to. If they are moving their primary residence for income tax purposes, it’s important to take special care, in case they are audited.

“In this case, they’re doing more than just redoing documents. They want to do everything they can to show that they’re relinquishing their old domicile and establishing a new domicile,” said Lederman. “The client will want to update their drivers license and move personal items to the new home. They should consider joining social and/or religious organizations in the new location as well.”

Financial advice regarding second homes

Clients considering purchasing a second home will want to think about financing. Does it make sense to purchase the home outright or take on the debt (depending on mortgage rates). Should they purchase the property in their name or have a trust purchase the property? Part of the equation will be market conditions, and part of it will be your client’s specific situation.

Ask questions, stay curious

Although there are certain strategies that have been proven successful in the past, there is no single playbook for financial advising. That’s one of the things that keeps it interesting, and drives the best advisors to continue to learn throughout their careers.

Financial advice needs to be tailored to each client, with a deep understanding of their life journey and goals. Staying curious and asking questions ensures that you’re a part of these turning-point conversations in your clients’ lives, and able to help steer them in the right direction. It’s a remarkable thing to be a part of these important life moments, and to have a real impact in clients’ quality of life. Your work will be felt by them and by generations to come.

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