Fully 95% of high-net-worth (HNW) investors who are working with an advisor either have an estate plan or are currently working on developing one. By contrast, millionaires who are do-it-yourself (DIY) investors are only about 52% likely to have a plan for their estate. An additional 14% of DIYers are currently going down that essential planning path, however.

Credo was asked recently about the value that financial advisors bring to the table for their clients. In particular, we were asked about the relationship between financial advice and Canadians’ initiatives in estate planning. The Financial Comfort Zone (FCZ) study produced evidence of the important role advisors play in the estate planning process. One of the elements that stood out very clearly showed up through a simple comparison of millionaires who have an estate plan in place and those who don’t, in conjunction with whether or not they work with a financial advisor.

We found that, on average, 85% of millionaires either have an estate plan of some form or are in the process of creating such a plan. But, when you carve all of these HNW investors into two groups (the group that is comprised of DIY investors and the group that work with an advisor) we start to see that advisors play a key, valuable role in ensuring that these investors have the plans they need for their families. As noted above, HNW investors are far more likely to have formalized an estate plan if they are working with an advisor than if they have chosen to manage their financial affairs in a DIY manner.

The question for advisors becomes this: Have you developed an estate plan for (and with) each of your current HNW clients? Your answer really must be yes. If it’s not, you should recognize that, with 95% of HNW investors already claiming to have an estate plan of one form or other, your valuable clients may be working with another advisor. If you’re sure they are not, there is certainly an opportunity to create value for these clients by shepherding them along an essential planning pathway. Those shepherding efforts constitute an important part of a financial advisor’s value proposition. It is clear to Credo that advisors are worth the price of admission and that they bring essential value to the table with their estate planning guidance.

The question for investors is this: Without an estate plan, do you really think you’ve got all the bases properly covered? You’re spending decades building your existence. Do you want to be able to hand off what you’ve created, however significant, to those you’ll leave behind, or are you content letting someone else pick up the pieces and letting the tax-man have his way with what you’re building? Are you really prepared to ignore the opportunity to optimize what you’ll leave behind by avoiding a conversation with a well-trained financial advisor? Worse yet, are you prepared to let those you leave behind fight over your estate because you didn’t take time to plan properly?

An estate plan is essential… and not just for the few who fall into the HNW category. It is arguable that investors who are not HNW should take even more care to ensure that their estate is well dealt with. A good financial advisor will motivate the investors they work with to establish a formal estate plan.


Note: Credo conducts this research in cooperation with TC Media’s Investment Executive… Canada’s leading publication for the investment and wealth management community. For more information about our Financial Comfort Zone study, call Credo at 905.919.1926.