Closing with Risk: Bulletproofing an Inheritance

Bulletproofing and Inheritance | Erin Botsford - The Advisor Authority
July 14th, 2020

While the title mentions bulletproofing an inheritance, we’re not going to cover the technical aspects of how. Rather, I’m going to show you how that conversation will help you close prospects like no other advisor ever has. Last week, I talked about the idea focusing on risk management as the opener to your financial planning relationship. I also mentioned that in my Elite Advisor Success System™ you get a chance to learn all 22 different areas of risk management that should be addressed with every client or prospect.

While every area may not pertain to every client or prospect, being acutely aware of these 22 areas of potential risk should be, in my mind, mandatory for every practicing advisor.

As I mentioned previously, I always began new client discussions with an exploration of potential risks. In a well-scripted and heavily practiced conversation, I would tell my prospects that before we discussed their investment portfolios, it was my practice to uncover any potential risks they may have in their overall financial situation.

After covering my personal story and hardships [read more here] to be transparent about why risk management is so important to me personally, I ask prospects for permission to go over a series of questions about the financial planning and how their assets are structured. I do this because I want them understand the true cost of poor planning and get them focused on bulletproofing their financial legacy.

Over 30 years as an advisor has taught me there were only two things you could do with a potential risk:

  • You could transfer the risk through some other means – through legal documentation, contractural clauses, etc.
  • You assume the risk… and just pray it doesn’t happen to you.

bulletproofing an inheritance | Erin Botsford – The Advisor AuthorityFor example, the one risk every single one of us has to assume and can’t transfer away is our own health risks. We can eat right and exercise regularly to mitigate and hopefully avoid risks, but we simply can’t ever transfer or eliminate them altogether.

Most other risks we face, however, can be addressed and/or transferred with some creativity and proper planning.

Once I received permission to ask about their personal situation, I had those 22 places to go. And, I was on a mission to uncover as many areas of their financial life that hadn’t been addressed. I eagerly explored every area because it was my duty, just as it is your duty.

You want to expose as many potential risks as possible so you can help keep them and their financial legacy safe and sound.

I called the questions I used disturbing tracts.  They were a series of scenarios I used to uncover potential risks that could potentially be reduced, managed, or avoided.

Bulletproofing an Inheritance

One example I frequently used involved how the prospect’s wills were designed. In this particular disturbing tract, I would ask about the provisions in estate planning documents and how their money would pass to their children or grandchildren. Never ask a prospect to send their estate planning documents in advance. If you ask for them in advance, these disturbing tract questions won’t work – the prospect will expect you to already know the answers to your inquiries because you have their documents.

In the inheritance disturbing tract, I could typically bet on the fact that their documents would leave the money to their children in one of two ways: Upon the second death of the husband or wife, it would typically go to the children either outright, or in some kind of graduated distribution.

In a graduated distribution scenario, they would get the money doled out a little at a time – like one-third when they were 30, one-third when they were 35 and the balance when they reached 40 (or similar schedule). 99% of inheritances are created with one of these two options. There’s almost always a missing piece, and here’s how I would uncover it…

I would begin, “Mr. and Mrs. Prospect, you said you have three children, Joey, Suzie and Alex. I know you don’t have your documents with you right now, but you probably have some basic knowledge about the provisions they contain. Can I assume that, Mr. Prospect, if you die first, you want Mrs. Prospect to have the use of all or most of your assets?” Usually the answer is yes, unless they have a blended family or something else. “And can I assume that once the second of you dies, you want the money to go to your three children, Joey, Suzie and Alex, in some form or fashion?”

bulletproofing an inheritance | Erin Botsford – Advisor AuthorityMy follow-up question begins the disturbing tract: “Can you tell me in what manner do your children receive that money? Do they receive it outright upon the second death or do they receive it in some sort of graduated distribution, like some at age 30, some at age 35 and the balance at age 40… or a similar schedule?”

The answers I received were pretty much 50/50. But how you phrase the question is more important than the answer. I didn’t say, “how is the money left to the children?”  I said, “In what manner is it distributed? Outright or graduated?

The distinction here is critical because it assumes they are going to give me one of those two answers. So, essentially, I set the stage.

For example purposes, let’s assume they selected a graduated distribution.  I’d follow up and say, “So you’ve left it to them in a graduated format and you think the last graduation is when they’re 45?” When they confirmed that was their understanding, I continued…

“Let’s assume when the second of you dies, your youngest child, Alex, has already reached the age of 47. What that means is that all of your children would have passed through all of those age graduations and, as a result, they would all end up receiving their entire inheritance as an outright distribution.

“At any point if it becomes an outright distribution, then essentially any money you leave to your children could be subject to negative circumstances that could occur in their future. For instance, what if, after they received your money, your daughter Suzie was going through a divorce? Would you ever want half of the money you leave Suzie going to her soon to be ex-husband? Or what if Joey has become a doctor and for whatever reason is being sued for malpractice?  Would you really want the money he inherited from you to be available to satisfy a judgment?”

The bottom line is leaving money outright or in a graduated distribution is never ideal. Here’s where these questions come to a close and set up the opportunity to do business together:

“What we like to see is what I refer to as “bulletproofing” the money you leave to your children. In working with your attorney, we would want to make sure that the money you leave to your children can never be used in a future divorce, to satisfy a judgment or liability suit, or to be used in a bankruptcy or creditor issue. I have always said if I was going to inherit a dollar, I would certainly prefer to inherit a protected dollar, rather than an exposed dollar. Most people would say, given the choice, they would also like to leave their money to their children in a protected environment vs. exposed. Wouldn’t you agree with that?”

Typically they agree and immediately ask why their attorney didn’t mention this to them earlier. The best answer is alway, “I don’t know but we can work with your attorney to help get that fixed.”

Never Disparage Another Professional

As I’ve said many times over, we never want to disparage an attorney or any another advisor, nor do we ever want to be accused of the unlawful practice of law. Most of us are not lawyers. However, it doesn’t take a lawyer to read through estate planning documents. In fact, if you have the CFP™ designation, it is your obligation to be familiar with and advise clients on proper estate planning.  Not to do so could be viewed as malpractice.

Manage ExpectationsIn most cases, we would go back to their existing attorney and ask them to review the clients existing documents, based on their current financial situation, to be sure all of the risk issues we’ve pointed out can be resolved.  Simply, we will request revisions so that assets are left protected for our new clients’ heirs and hopefully for generations.

This method of using disturbing tracts to identify and remedy risks for prospects makes it almost effortless to win them as clients. It works so well because you’ll discover in most initial prospect meetings, the planning issues you bring up tend to be areas that had been overlooked up until that point.

Once you point out the potential pitfalls of not “fixing” these issues, the prospect will be attentive and eager to explore more with you. No sane person who had spent their entire lifetime working and saving wants to risk losing their hard-earned money or their ability to live the lifestyle they have always dreamed about. Nor do they want their life savings ending up in the wrong hands.

Disturbing Tracts can be Treasure Maps

As I said earlier, In my Elite Advisor Success System™ I train advisors how to identify and magnify pitfalls in all areas of a prospect or clients’ financial situation. The good news is – most of you know the answers; you typically just don’t know how to use these non-investment related issues to ask questions that ultimately point out “pain points” in a prospect’s existing situation.

In the end, in order to get a prospect (or a client) to do what is in their best interest, you need to point out problems that may currently exist or could exist in the future, and encourage prospects and clients to deal with them. Using this method, disturbing tracts can often be treasure maps for hidden opportunities to help your clients.

Unfortunately, if the prospect or client is not “disturbed” enough to understand potential issues exist and could someday wreak havoc on their financial situation, they are likely to do nothing about them. You always want to do your best, as their trusted advisor, to help them preserve their legacy and lifestyle – regardless of whether or not they take action.

Get More Training

Again, if you want to win prospective clients over, I can tell you from experience, you will find more success by addressing risks, rather than returns. Become an expert advisor in risk planning and management, and let financial planning be a part of the process along the way.

I give you all my Disturbing Tracts in the Elite Advisor Success System™, including the scenarios, the setup, the questions, and the answers/pathways I use. It’s one of the ways I’ve helped advisors take their businesses to the next level by conducting a meeting that’s unlike any their clients have ever experienced.

If you’re interested in learning how to reach the next level in your business from a Barron’s Top 100 Advisor, I would love to have you on our next live call. Learn more about the program and enroll here.


Business Success, Client Relations, Closing Prospects, Sales

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