Podcasts The Wealth Transfer Challenge

Please note that this transcript has been edited for clarity and brevity. 

Matt Van Dijk: Thanks for joining us for another Praemium podcast. I'm Matt Van Dijk, head of sales for Queensland and New South Wales. Joining me today is Francis Rigby, a director with Financial Advice Matters and the head of advice for the firm. They're a southeast Queensland-based firm serving businesses and clients all along the east coast of Australia. Thanks for joining, Francis. 

Francis Rigby: Thanks for having me. It's always a pleasure to talk with you about finance. 

Matt Van Dijk: Today's discussion is about one of the top unmet advice needs for investors and their advisors, which is managing inheritance and the transfer of wealth between generations. This is becoming a significant issue in Australia. We'll be sharing ideas to help listeners maintain relationships with the broader family and ensure beneficiaries receive great advice on managing and receiving their inheritance. Francis, our research identified inheritance and estate planning as a top unmet advice need. Are you seeing this in your practice, and how do you approach this sensitive issue with clients? 

Francis Rigby: It is, and it's probably one reason why it's a top unmet goal. People don’t want to discuss what happens if they're not here. The advisor can step in to create a conversation focused on supporting family. Having conversations around a journey and preparing things in perpetuity can lead to a good result. In our business, we try to involve all parties in the conversation, whether it's a couple or a couple and their children. Understanding someone's values makes it easier to discuss the transfer of wealth or assets. 

Matt Van Dijk: Advice often boils down to managing, growing, protecting, and transferring wealth. To get to that transferring aspect, how do you bring clients around to being more open to considering it? 

Francis Rigby: Yeah, I think when someone values family and wants to grow their wealth to provide for them, I like to use diagrams, flow charts, and timelines with ongoing arrows instead of end points. It's not age-based; it's about preparing and looking after your family. I'd discuss important values around transferring to children, even adult ones. Start early, help them with goal setting, and align their finances so they don't waste money. People avoid discussing death, but the biggest fear is transferring assets just to have them wasted. By educating the family unit, you can broach this subject and integrate it into conversations. Be mindful of biases, like my family who never talked about age. I had to use a different angle, like looking after my younger brother. Navigating this is tricky, but as advisors, we have a duty to play our role. If we aim to look after people's well-being and financial well-being, these conversations are crucial. 

Matt Van Dijk: Are there any ways to approach this from a reverse direction, helping children manage what's likely to be their future inheritance? 

Francis Rigby: Yeah, it can happen both ways. When we're having conversations with clients, it's important to broaden our view and consider the "family tree environment." Even if we're advising someone in their twenties, we need to understand their circle of influence and how it might impact them now and in the future. By asking questions about their family tree, we can uncover blind spots they may not have considered, such as the transfer of wealth. I often use mind maps, whiteboards, and pictures to help clients visualise these concepts. 

Clients may not realise they need help with their blind spots, such as transferring assets in the most tax-efficient way possible. By sharing stories of experiences where others have made costly mistakes, we can educate clients and help them avoid these pitfalls. 

As advisors, we can act as project managers, bringing in other experts like lawyers and estate planners to help clients address these blind spots. It's important to start with education, explaining the different areas and aspects of finance, such as estate planning, superannuation, and money management. These topics aren't always taught in school, so it's crucial to help clients shape their understanding early on. 

Matt Van Dijk: For my two children, I have small investment portfolios that I started when they were young. I want to show them the power of compounding and investing over time. Beneficiaries may not have engaged an advisor before, so it's important to help them understand the value of advice and attract the next generation. 

Francis Rigby: This is a critical point that I think goes beyond just money and wealth. To have a meaningful conversation, you need to start by understanding a person's goals and aspirations. I really love the Keith Abraham 25 questions to identify your hundred lifetime dreams. Essentially, it's a set of 25 thought-provoking questions that are designed to be difficult to answer with only three things in each category. By going through this exercise, you can uncover the non-financial aspects of a person's life that are driving their financial decisions. 

For clients in their later years of wealth accumulation with adult children, I like to offer the ability to go through some of these exercises that are not financially related, but they impact a person's financial life. It's important to teach basic financial literacy skills, like how to put all your information on one piece of paper. I call it "giving back" to society and clients because adding value to people through advice is crucial. If you focus only on high net worth clients and charge high fees, you miss out on the benefits of benevolence. 

As a professional in the financial industry, I believe that we should have an element of benevolence. It's not just about making money but also about helping people achieve their goals. You should focus on what's important to your clients, not just your own profit. By understanding a person's values, you can understand their behaviour around finance. Everything is driven by behaviours, and it's essential to uncover what drives your clients' financial behaviours.

 
Matt Van Dijk: Some are learned, some are inherited. 

Francis Rigby: Yeah, some behaviours are learned, some are inherited. Similar to your story, I've had a little investment for my 12-year-old son for the last four years. When he was eight, I explained to him about the concept of shares, profit sharing, and growth, using West Farmers as an example of a top holding. As an eight-year-old, he grasped the concept well, which was a proud moment for me. My dad, whom my son calls Papa, picks him up from school every day and on their way to Bunnings, Christopher told Papa, "Just to let you know, you can spend as much money in here as you want because I get some of it." It was a funny yet proud moment.  

This experience also relates to the importance of understanding values and behaviours that shape financial decisions. I've seen and conducted sessions on retirement planning that have nothing to do with money but rather focus on helping people navigate their vision of retirement and what they want to do. Because you don't know how much money people need until you know how they plan to live their life.

 Matt Van Dijk: When discussing with clients about what's important to them and where they're going, do you find that they naturally tend to steer the conversation towards planning for their bucket list, preparing for the cost of care, and considering what happens next? 

Francis Rigby: Yes, I believe that happens because once you start discussing values, family becomes part of the conversation. I usually ask clients if they have any concerns about their family or adult children, which leads to discussing the transfer of assets. I ask them what's important to them about everything they've created and what they want to happen with it. Often, this leads to conversations about potential options, depending on how much the client has accumulated. 

The key is to start with the values conversation, as it leads to discussing the numbers and the mechanical side of things. Most people want to maximise their net benefit for their lifestyle or their family's lifestyle. 

Matt Van Dijk: I want to discuss a specific case that I'm proud of from our time working together. In 2009, we decided to work more closely with an estate planning business. How has incorporating the professional services of a specialist estate planning service with your clients worked for you? What have you learned about project managing the relationship between the client, lawyers, and your own business? 

Francis Rigby: It's a really good question because I think the mistakes, we made early on in discussing estate planning with clients were because we didn't fully understand what it meant to them. It's a bit dangerous to have some knowledge but not enough to have a healthy conversation about what's important to the client. We shouldn't tell them exactly what they need to have in place, like a testamentary trust or safe planning. Instead, we should have conversations about what they want to achieve with the wealth they've accumulated, the legacy they want to leave behind, and what they want for their family. We can identify concerns they may have, such as a child who is a spendthrift or a marriage that's on the rocks. By identifying these trigger points, we can help them understand what's at stake and support them in making informed decisions. Rather than just giving them the contact details of an estate planning lawyer, a better approach is to arrange a meeting where we can set the scene and help them get their financial information organized on one page. This makes it easier for them to see the big picture and take action. 

As for sharing the fact finding, I don't like to call it that. Instead, I create a "you on a page" document that captures all the relevant information in a clear and concise way. Mind mapping is another useful tool that helps clients visualise their financial situation. It's important to remember that having these conversations isn't always easy, so we need to be there to guide and support them every step of the way. 

Matt Van Dijk: It's interesting to think about the difference between the generations, especially when it comes to their expectations of financial advisors. Older Gen Xers and baby boomers may have different expectations compared to younger generations, who are more tech-savvy and expect everything to be accessible through their phones. One challenge we face in the financial services industry is the slow adoption of technology. I remember a few years ago, I had to fax something to move money between products. How do we bridge the technology gap and meet the expectations of our clients, both old and new? 

Francis Rigby: Yes, it's an interesting challenge. When engaging with younger clients, it's important to understand their values, behaviours, and how they interact with technology. They may use apps like Acorns or Raise to save money or use apps to buy goods and services overseas. As advisors, we don't have to use these tools ourselves, but we should understand them and be able to talk about them. It's all about understanding people and being able to adapt our interactions to fit their needs. We need to be flexible and adjust our style to suit the person we are talking to. It's not about age, but how we interact with our clients. I think the key is to have conversations and build trust with our clients, so we can help them achieve their goals. 

Matt Van Dijk: Yes, that's so true. Clients want to have conversations and trust their advisor to help them. We need to make sure we're having those conversations and doing it in a way that makes our clients comfortable. One of the challenges we face is when a client receives an inheritance, they often don't stay with their benefactor's advisor because they don't think that advisor is the right fit for them. It's important to be able to manage multiple generations and have a diverse range of thinking and personality within our businesses. We need to identify mismatches and make sure our clients are with the right advisor for them. 

Francis Rigby: Yes, and I think it's important to understand what other people value, not what we value. We need to avoid judgment and biases and focus on what our clients want to achieve. Our profession is very much psychological and behavioural, and we need to understand our clients' behaviours to help them with their finances.

 
Matt Van Dijk: Looking back with the 2020 clarity of hindsight, what's something you wish you had done sooner? 

Francis Rigby: I wish I had done a self-analysis sooner and looked in the mirror to understand my biases and the way I react to things. It's hard to have no judgment, but it's something I've worked on for 30 years. I think it's important to focus on things that are important to us and that we can control. 

Matt Van Dijk: And looking forward, what's something you'd like to do more of around helping clients with intergenerational wealth management and inheritances? 

Francis Rigby: I would like to pass on my learnings and experiences to others and help them add a positive difference to people's lives and generations. If we can add value and help people achieve their goals, they will be happy to pay for our services. It's like having a personal trainer – they identify our blind spots and help us achieve our fitness goals. Similarly, we can help our clients achieve their financial goals. I've already started doing a lot of things in the financial wellness space, and I would like to do more of that. 

Matt Van Dijk: To wrap up, I want to emphasize that if intergenerational wealth transfer is important to you as a listener and something you want to develop in your practice, don't keep it a secret. Let your clients know about it by promoting it on your website, materials, and newsletters. This is a valuable service that adds a lot of value and good advice to your clients and their families. 

I want to thank Francis for joining us today. It's been a pleasure to have this fireside chat and I'm grateful for the opportunity. I hope we can do it again soon for another interesting topic. Thanks again, Francis. Cheers!