– Gary A. Loftsgard, CFP® –
Financial professionals, like everyone else, are being impacted by a 21st century information blitz few could have imagined not long ago. Among other things, this new information era has enabled the general public to become more informed/aware of their personal estate planning needs. You may have already noticed clients taking a “knowing” attitude with them as they go into meetings to discuss investment suitability, risk management, and estate planning issues with their advisors. Obviously, it would be wise to be prepared unless you don’t mind working at a disadvantage.
The One-Stop Shop
What does all this mean for you, the client’s
agent/advisor? Simply stated, if you want to stay competitive and grow,
you need to be informed. But information alone is not enough; you
also need to be connected with proven service providers. Today’s
clients are looking for someone to put it all together, to bundle granular
products and services into a meaningful/usable plan. In other words,
clients are looking for a one-stop shop to help them with all of their
planning concerns and objectives – whether simple or complex. That is good
news for any planner willing to take advantage of the opportunity in the
estate-planning marketplace. If you know where to find help, you can
operate at a decisive advantage.
Fitting Your Products into Your Clients’ Estate Plans
If you are an agent who sells fixed income annuities, for example, can you be of help to your clients in advising how an annuity can best fit into their living trust estate plan? That may be of great importance to your clients. Is long-term care insurance the only solution you have concerning a lengthy nursing-home stay and resulting estate asset spend-down? What about the concerns of those who have an incapacitated child receiving SSI benefits? What information can you offer to your client about being able to benefit his incapacitated child (after the client’s decease) with a certain type of living trust format that will not disqualify that incapacitated child’s subsistence benefits?
Networking with Other Professionals
Optimal estate planning implementations are
best accomplished through the use of multiple counselors networking together to
help meet clientele estate planning goals and objectives.
The American Bar Association Concurs
The American Bar Association (ABA)
recognized their constituency’s confused reluctance to work with “other”
entities in the financial and insurance related fields and took notable steps to
address these matters by sanctioning a commission to study the problem and make
recommendations. The ABA Commission on Multidisciplinary Practices
established in 1999 duly recommended that “lawyers be allowed to partner with
professionals from other disciplines with whom fees would be shared”.
Changes to the model rules of ethics to allow multidisciplinary practice were
then proposed. (Many State Bars have already embraced and applied the
recommendations.) The ABA obviously believes that clients and lawyers
would be better served through multidisciplinary practices.
Planners & Agents are Already Involved!
Because of the nature of their profession and accompanying job descriptions, financial planners and insurance agents are already directly involved with their clients in the area of estate planning. Has an insurance agent ever sold a death-benefit product such as life insurance or certain annuities without helping their client choose a beneficiary? The answer is quite obvious. Consider the bank representative helping a client purchase and install a payable-on-death (POD) account. The job descriptions of such people require their direct involvement in the estate-planning process. It is common ground all such practitioners.
What About Unauthorized Practice of Law (UPL) Issues?
When we take a closer look at the issues
involving certain unauthorized practice of law (UPL) statutes in some states, we
uncover some interesting facts. Respective to the timeline of common law
history, UPL statutory placements are a recent phenomenon – first appearing in
1930. Prior to the introduction of UPL statutes, lawyers and non-lawyers
alike regularly performed legal services together in a free market benefiting
the general public essentially without incident (at least in comparison to the
number of legal-service problems occurring in today’s environment).
Let’s try to examine how real life applications
of this peculiar law fits into the operating paradigm / legal doctrine of it
serving the general public – which is what all common law is supposed to
Legal Interpretations of UPL Statutes are Not Congruent
Alas, there are many conflicting opinions
about the issues of UPL even within the legal community itself. Surface
comparisons of most UPL definitions from various jurisdictions would indicate
that such kind of ambiguous law is not only vague, but also unenforceable.
For example, in comparison to the Illinois statute, here are a few other
(contradictory) jurisdictional opinions/rulings:
The Florida Supreme Court issued criteria in their determination of what does and does not constitute the unlicensed practice of law, and how certain parallel issues may apply:
It should be noted that financial advisors do not have to advise anyone as to the direct applicability or non-applicability of estate planning law for their clients. However, any advisor can certainly discuss all the issues and options with his client to the extent of that advisor’s experience and knowledge base. In other words, you (as the advisor) are to simply leave the ultimate applicability and suitability determinations up to the client’s legal counsel. As a financial advisor, you do not have to make those legal determinations. Notwithstanding, you can and should always bring your client’s data, applicable information, personal opinions and professional suggestions to the conference table. In fact, that’s part of your job description.
Who is Filing UPL Complaints?
Recent studies indicate that ninety-eight
percent (98%) of all UPL complaints are initiated by lawyers. In other
words, it is the lawyers, themselves, who file 49 out of every 50 UPL
complaints. Yet, those in the legal profession who promote these
rigorous UPL restrictions want everyone to believe that such kind of statutory
law exists only to protect the general public. A
discriminating evaluation of UPL statutes reveals that a much different overall
effect is created by this type of law making, rather than that of protecting the
public. If fact, it seems that (many) UPL statutes serve only to define
“privileged activities” that may only be performed by members of a (legal)
cartel, who customarily discount the damage that such “protectionism” imposes on
A Law Professor’s Candid Opinion About UPL Statutes
George C. Leef, adjunct Professor of Law and Economics at Northwood University, stated in his treatise The Case for a Free Market in Legal Services: “We start with the fact that no U.S. Supreme Court case has, after first identifying speech as fully protected, acquiesced in a regulatory system that forbade that speech to all but a handful of individuals who were licensed by the government to engage in it. But this is precisely how UPL laws operate. They (UPL laws) (attempt to) forbid everyone except licensed lawyers from imparting information about the law and about how to use and access a branch of government. In this respect, current UPL laws achieve the exact opposite of narrow tailoring. In fact UPL laws are specifically tailored to have all the subtlety of a blunderbuss”.
The Legitimacy/Lawfulness of Marketing
Another misdirected legal argument states that
when a non-lawyer talks publicly about the benefits of estate planning with
trusts, he is pursuing an unacceptable ulterior motive (and is also giving
unauthorized legal advice at the same time) in trying to get in front of clients
solely to sell more securities and/or insurance products. Well, if someone
is trying to use estate planning (or any other subject of interest) to get in
front of a client to sell a non-suitable, high commission product without
substantive regard to the welfare of the client, then that is obviously a
problem. But non-lawyer CFPs, for example, are held to a standard that
includes examining and discussing all planning issues with the client, including
estate planning. ChFCs, CLUs, CPAs (etc.) who hold themselves out as
“planners” would seem to have the same responsibilities. Everyone has a
right to pursue the development of his own legitimate business in a free
market. If someone is doing a bad job then the marketplace itself will
ultimately discard that person’s services; it works every time.
Clients Do Need Legal Representation
The underlying concerns involving UPL
arguments accorded to activities within the circle and influence of estate
planning professionals can reduced to only a few important doctrines – (i)
proper disclosure and (ii) legal recourse. If a lawyer is involved at
some point in the process of providing the client a legal opinion as to the
applicability and feasibility of the plan, then it would seem clear that the
client has obtained legal representation. Proper legal representation is
an important component in multi-disciplinary transactions involving
asset-disposition and contracts such as trusts.
Attorneys Often Need Your Assistance
Today there are many different types of assets
that clients may possess in their financial portfolio. These assets can
vary in their specific uses and taxable characteristics. Therefore, the
matter of how to properly manage and transfer certain assets may well be beyond
the scope of the common lawyer’s experience. The issue of estate planning
has little meaning if the client had not first worked a plan to (a) accumulate
property (investments) and then (b) preserve the property (risk management
etc.); now he wants to set up a plan to (c) transfer the property. These
worthwhile planning objectives usually create the need for using a
multi-faceted task force.
Most lawyers do not have a vested interest in getting the plan funded unless they charge a larger (sometimes much larger) fee to provide that service. Therefore, the living trust plans provided by law firms often do not get funded. Lawyers usually don’t sell residual products such as insurance or securities, and therefore “don’t have the extra time” to work with the plan (funding etc.) any further. So, they never learn to properly fund the trust. The problem is that a non-funded living trust is of little value to the client. So, you see, the bottom line is that your estate planning clients truly need your help and assistance.
The estate-planning arena is a vast marketplace that absolutely requires the use of various professionals and multiple services to do the job of meeting the overall planning needs of the general public. Therefore, as a advisor, it would be to your great benefit to seek out a systematic, professional networking system or a group of focused professionals to work with you in your estate planning activities. If you ally with the right people, you can operate in this arena safely and very effectively. Multidisciplinary networking is a proven concept whose time has come; in fact, it is already here in full operation. Without question, those who acknowledge the situation, prepare themselves, and take appropriate action will be promoted in the marketplace and increase their base of business.
For various reasons, clients may agree to
convert a portion or even the entire C/D fund to a fixed income product. A
fixed-income product purchased from the equity account may well fit into their
retirement goals. But, hopefully, you are not going to try talking them
into liquidating everything they have to purchase a million dollar annuity (you
could lose your license that way). If you are selling only fixed-income
products, you will have to leave everything else on the table unless you are
connected to other competent intermediaries.