Your clients are dying

Close to a quarter million Canadians will die in the next 12 months. Statistics Canada data notes their lives will be claimed by cancer and heart disease (the big killers), or a range of other illnesses and injuries. Some will commit suicide. A few others will be murdered. Bells will toll. Eulogies will recall lives lost. And processions of mourners will wind solemnly toward crowded cemeteries.

How will all this affect you?

Chances are, at least some of the departed will be your clients. After all, many financial advisors have built their practices on the fortunes of an affluent baby boom generation, which is hurtling toward retirement and old age at an alarming pace.

The first boomers turn 65 in 2012, and their life expectancies aren’t as high as you might think.

At birth, Canadians who started life between 1950 and 1952 (four to six years after the beginning of the baby boom) could only expect to hold out to age 66 if they were men and age 71 if they were women. And historical statistics show older clients had even lower life expectancies at birth.

So if you don’t already have one, it may be time to buy a funeral appropriate black suit. It’s also critical to develop strategies to prepare your business and yourself to handle client deaths.

There’s an opportunity for advisors who get it right to retain the assets of their clients as they pass away by working well with the beneficiaries of their clients," says Jean Blacklock, vice-president and managing director of Wealth Services at BMO Harris Private Banking in Toronto. "Choosing to ignore the aging of clients, choosing to ignore the conversations that are required around that, is to miss out on a real opportunity for personal and professional development."

Few things make clients squirm as much as conversations about their own mortality, but there are ways of bringing up the topic without sending your clients into a tailspin of panic and denial.

Starting with a story can help break the ice, says Jeanette Brox, CFP, a financial consultant with Investors Group in Toronto, whether it’s about a relative or friend who passed away with unfinished business or a recently deceased wealthy celebrity whose estate is in turmoil. "Everybody knows somebody who didn’t take care of the loose ends, and then the government got involved and it was a mess," she says, adding that people respond when she offers them a chance to gain a sense of control over uncontrollable death with a well-thought-out estate plan.

MaryAnn Kokan-Nyhof, CFP, branch consultant at Rice Financial in Winnipeg, has found that asking people to imagine something happening to them tomorrow or anytime in the future tends to stir up superstitions, so she always presents death scenarios in the past tense. "Mr. or Mrs. Client," she says, "if your husband had passed away yesterday … what would you be doing today? Do you know where the bankbooks are? Do you have wills?"

For his part, Mark Halpern, CFP, founder of illnessPROTECTION.com Inc. in Markham, Ontario, believes in straight talk when it comes to death. Financial advisors, he says, are "reality cops"—the people who ask the tough questions. He asks people straight up: what do you want to have happen when you’re retired, when you get sick and are in a nursing home, and when you die? "There’s no cheating the situation," he says. "Unfortunately, it’s going to happen to all of us."

Involving Heirs The good news is that talking about death is not always a hard sell. Vera Adamovich, a CFP at the Independent Planning Group Inc. in Stittsville, Ontario, has found that most elderly people are very open to discussing these issues. In fact, by the time they reach their 70s and 80s, they’re often the ones raising the subject. "A lot of people reach that stage when they say, ‘It’s time for me to take care of business’… and I’m pleasantly surprised at how many want to involve their children," she says.

A case in point: one of Adamovich’s clients recently asked her to have lunch with him and his son, who was visiting from out of town. The client wanted her there to help him explain some decisions he had made in his will—specifically, strategies to protect his daughter’s inheritance from falling directly into the hands of her husband. It was particularly important that the son understand his father’s wishes, since he was named as the executor in the will. Adamovich was happy to oblige.

"I encourage people to be as open and clear with their kids as possible," she says, "but I leave it up to them. I never tell people what they must do. I give them the pros and cons and let them come up with a strategy that’s comfortable."

Many advisors say that cultivating relationships with the next generation is essential to ensure their practices don’t die along with their clients. Anthony Windeyer, CFP, with Coast Capital Insurance Services Ltd. in Richmond, B.C., whose practice focuses on business insurance and estate planning, says getting the family involved minimizes the potential for litigation, and he encourages heirs to agree to, and sign, buy-sell agreements.

"If you bring everybody into the picture ahead of time, you have a better chance of everybody being on the same page," he says. "There are no surprises, and therefore no hard feelings."

Discussions with clients and their families should include what Blacklock calls the "essential trio" of the will, the power of attorney for care, and the power of attorney for property. Other highlights are funeral wishes, beneficiary designations on investment and insurance assets, estate tax minimization strategies, living benefits and life insurance, business succession intentions and philanthropic plans.

Teresa Black Hughes, CFP, senior financial planner and investment advisor at Solguard Financial Ltd./PEAK Securities Inc. in West Vancouver, prepares a "talking tool" for clients and their families— a one-page estate map, built inside an Excel spreadsheet, which summarizes a client’s assets, estimates tax and probate liabilities on death, and describes bequests.

When families aren’t comfortable sharing that level of detail, she offers to send a reduced version of the spreadsheet to the children, after confirming with parents the specifics they’d like to share, which explains the client’s bequests in broad strokes and reminds the kids to call her first if anything happens to their parents.

Nurturing relationships with both clients and their families has paid off in very concrete terms for Brox. "When people pass away, oftentimes I know their relatives so the money usually just rolls right over in their names and I’m still managing it," she explains. "It’s a big decision when you get an inheritance, and you want to deal with somebody that you know. You don’t want to go to a stranger … Most times I retain the money."

At Death’s Door One challenge advisors will face more frequently with an aging population is incapacity among their clients—both physical and cognitive. As clients near the end of their lives, it may become impossible to modify documents such as wills, so keeping everything up-to-date while clients are mentally competent is essential.

Since both powers of attorney and executors will play an important role if clients can’t make decisions for themselves or pass away, Doug Lamb, CA, CFP, with Dundee Private Investors Inc./ Spera Financial in Toronto, makes a point of getting to know the designated decision-makers. And, even before clients are incapacitated, he says there are steps advisors can take to help clients’ children take care of some of their parents’ financial responsibilities.

"There are a number of things that can be done to reduce the stress and anxieties of aging parents as they manage their financial affairs," he says. For example, as clients start to require help with their day-to-day banking, he recommends setting up automatic payments and encourages children to discuss the benefits of sharing online bank account access and/or setting up joint accounts with their parents.

As old age progresses, chronic illnesses often set in. One of the most frustrating experiences for advisors is meeting with a client for the first time when they no longer qualify for insurance policies that are the bedrock of many estate plans.

Halpern says segregated funds can be a solution in this case. Moving non registered money that is sitting in a GIC into a seg fund guarantees the principal amount, offers the potential for some growth and, most importantly, allows money to pass to the designated beneficiary quickly, without going through probate. Windeyer has also used impaired annuities in cases where a client with a serious illness needed a source of guaranteed income.

But clearly it’s preferable to put plans in place well before a client’s final hours—after all, insurance eligibility isn’t the only problem when clients acquire a financial advisor too late.

Adamovich recalls one elderly new client who had been widowed and recently remarried. The advisor was concerned about the well-being of the client’s wife if he were to pass away and asked repeatedly about the status of his pension plan, which allowed him to choose to take a reduced amount now so something would be left for his spouse after his death. He brushed away her questions and insisted that he’d taken care of everything. A few months later, he died and it turned out that he had called his pension provider to make inquiries about changing his pension, but had never followed through. As a result, his wife was left with too little— even according to the Family Law Act—and had to challenge the client’s adult children’s claims on the estate.

"If I had had more time, and if he wasn’t in his last days, I would have asked him to show me those documents," Adamovich says. "The lawyers made a lot of money and it ended up where it had to settle… but it was a nasty situation."

I Have Bad News No matter how much experience advisors have dealing with dying clients, there are some cases that still tug at the heartstrings years later. For Black Hughes, it’s the client who showed up at her office one day without an appointment and announced that she had been diagnosed with an inoperable brain tumour.

"I was her first stop after the neurologist," Black Hughes recalls. "She was pragmatic in terms of her approach. She just wanted to know if she happened to collapse in the street on the way home, that while she was drifting out everything was OK. She came into my office; we closed the door; she told me this."

When clients share earth-shattering news about their health, Black Hughes says she reminds herself to slow down, lower her voice and give them as much time as they need. Her primary concern (and this also goes for clients who tell her a family member has died) is always to ensure they have enough money in their bank accounts to cover immediate expenses. Then she asks questions about how they’re feeling, how their families are reacting and whether they’re getting enough support.

Doug Smith, a professional speaker, trainer and consultant based in Madison, Wisconsin, coaches healthcare workers on how to work with patients with terminal illnesses and bereaved families. "Sometimes the best thing to say is nothing at all, and just to be there and listen," he says. It may be tempting to say, "I understand what you’re going through" or "I know someone else who experienced exactly the same thing." But because each situation is unique, Smith says this is often the worst approach. Instead, he suggests, acknowledge you’re at a loss for words and focus the conversation on what they’re experiencing. He adds it’s a good idea to be aware of the resources available in your community to help people cope with illness and bereavement so you can refer clients to professionals if required.

Kokan-Nyhof takes client deaths hard because she thinks of her book of business as an extended family. "I never avoid the subject," she says. "I always express my condolences sincerely and instantly… and I never pretend that things are normal, because they’re not. I know that people will be in shock for a long time after, so I direct them not to make any major decisions of any type for at least six months."

Her most difficult case involved the untimely death of a young mother, who was diagnosed with a type of cancer that progressed very rapidly. Kokan-Nyhof went to see her client in hospital to get some paperwork signed and came face to face with the woman’s son and daughter. It was an extremely tough day, but she says, "I feel that part of my professional life is being a human being, and therefore offering comfort comes naturally to me."

Next to hospitals, nursing homes may be the bleakest places to hold client meetings, but they’re the site of regular visits Brox makes to two of her clients. She lets the family know she’s heading over, equips herself with a joke and a batch of homemade cookies, and is careful to allow her clients to make decisions about their finances for as long as possible.

Enabling clients to maintain their autonomy is important to Jonathan Sceeles as well. Sceeles, CFP, a financial advisor at Edward Jones in Toronto, is still haunted by one case in which an older client, who was an astute investor and proud of his portfolio, became vulnerable to the whims of a nephew as his health failed him. In the process of moving his uncle into a nursing home, the nephew cleared out his carefully constructed investment accounts.

Sceeles had to watch his client, frustrated by his frailty, burst into tears in front of him, and he couldn’t do anything to protect his interests.

"We’re in the financial industry and we’re often perceived to be hard-edged people for that—that we think about numbers and money, and nothing else," he says. "But in a very real sense, you’re dealing with people’s lives, senses of identity, senses of pride and dignity in the final years of their lives. In helping them get an estate plan in place, you’re doing something that goes beyond the money."

Structured Response When the inevitable happens, Brox always attends client funerals, but because she knows she can get emotional she goes right at the beginning and approaches the family to let them know she’s there for them, and that they should contact her when they’re ready. "Then I go to my car and cry," she admits.

For advisors who aren’t comfortable expressing emotions to clients, it can help to have a structured response to client deaths. That way, when the call comes in, you and your team know exactly what to do and you can focus on the business aspects of the case.

"Have some basic areas that you know need to be covered and information that you need to gather and try to standardize that," advises Sceeles. "The more often you do it, the more comfortable you will become. The same kinds of issues will tend to resurface and you’ll become a little more adept at dealing with them."

Black Hughes has a "death-of-a-client checklist" she uses in her practice (see page 26). She records the date and cause of death, runs statements with values on the date of death, stops payments if necessary (for example, payments from RRIF accounts), and notifies companies associated with a client’s investment holdings.

She says it’s also important to get a read on bereaved relatives. If they’re overwhelmed, keep decision-making to a minimum. If they can handle some details, let them take charge of certain tasks. "I think sometimes as advisors we want to do everything for the client with proper authorization, but I’m not sure that’s always in the best interests of the client," she says. "Sometimes the mere act of taking care of business helps them get through that grief; through that process."

Smith, as a grief counseling expert, agrees with Black Hughes. He says there are two major ways people deal with loss: intuitive grievers have an emotional reaction to loss, whereas instrumental grievers process loss through action. Instrumental grievers, in particular, can benefit from having a short, manageable to-do list.

Moral Imperative When it comes right down to it, dealing with the reality that your clients will die is a risk-management strategy for your practice. It helps you take steps to address the danger that client assets will move to another advisor when they are transferred to the next generation, and it also enables you to document recommendations made, so you’re less vulnerable to lawsuits from heirs.

"In my mind, it’s a moral imperative that you offer your clients the opportunities to deal with these areas," says Windeyer. Clients won’t always take you up on the offer immediately, but advisors should make the effort. "In most circumstances, people would like to make sure that everything is in order and that the estate is preserved and the people they love and care about are helped out."

So, while you can’t stop the march of time, you can ensure that clients have appropriate plans in place to protect their assets, their heirs’ bequests and your business interests. Not a treat to be sure, but it’s your job to protect clients from the tricks.