Modernization of estate planning


The wealth management industry is in the midst of a technological transformation as companies turn to technology to meet the challenges of profit growth, changing demographics and operational efficiency.

This phenomenon is particularly visible in estate planning, an area that has long been expected to disrupt and currently requires wealth managers to devote resources to training financial advisers, hiring in-house estate planning specialists. and manual conversion of dense documents into client presentations. Requiring this level of investment has led many companies to reserve estate planning advice for their wealthier clients, those who can benefit from a wider range of estate planning strategies and whose assets under management justify the costs. . Yet this creates a perception that estate planning is only for the rich, despite the multitude of benefits it can offer clients of any wealth level.

Wealthtech companies are turning the tale by developing solutions that democratize estate planning through artificial intelligence, design thinking and automation. Wealth managers who take advantage of this disruptive technology will make estate planning more accessible to a broader clientele, improve the ability of financial advisors to differentiate themselves and drive future growth.

The current state of estate planning

Estate planning plays an important role in wealth management by providing an additional tool that financial advisors can use to add value and build stronger client relationships. For clients, there are many benefits to having a thoughtful estate plan in place, including peace of mind, asset protection, and preparing future generations to inherit wealth. However, the process of providing estate planning advice is cumbersome and time consuming.

A financial advisor should work with a client’s estate planning lawyer to develop an estate plan, review the details with the client, and implement agreed strategies. Once this step is completed, ongoing monitoring and reporting is required to ensure the plan continues to align with the client’s situation. Over time, these plans can be challenged by difficult family dynamics, a changing regulatory environment, or increased wealth. Financial advisors are expected to stay ahead of these changes and understand their potential effects on the plan. This process requires a significant and ongoing initial investment of time on the part of the financial advisors.

Disruption of estate planning

Innovation opens the door to the democratization of estate planning. Wealth managers who previously reserved estate planning for their wealthiest clients can use artificial intelligence and automation to start engaging the high net worth segment to capture the millionaires of tomorrow. For example, a wealth manager can add an estate planning page to their client portal that allows clients to download estate planning documents and receive automated analysis. A client who downloads their estate planning documents would agree to share this data with the wealth manager in order to improve the level of advice they can receive. The client can then choose to meet with a financial advisor to discuss their plan or a financial advisor can proactively contact to set up a meeting. This service would add value to clients while providing data that wealth managers can use to better understand their clientele.

Estate planning technology can also enhance goal-based advice by enabling advisers to provide visualizations that illustrate the alignment of an estate plan with a client’s goals. For example, a client might have a goal of donating $ 1 million to their child at the end of their life. Traditional goal-based wealth management technology can estimate that $ 500,000 invested in an equity portfolio today will allow a client to achieve that goal given their life expectancy. While the result of this analysis is financially intuitive, it does not take into account the structure of a client’s estate plan.

Today, financial advisors are required to review estate planning documents to ensure that the plan matches that financial goal. Alternatively, layering estate planning technology would allow the financial advisor to automatically see that the estate plan needs to be updated. This would improve their initial recommendation by suggesting that the client open a trust to more effectively increase the likelihood and magnitude of the wealth that can be transferred in a tax-beneficial manner. By leveraging estate planning technology, financial advisors will be able to provide more holistic advice to their clients in real time.

Estate planning technology also creates opportunities to engage future generations. Estate planning lawyers recommend that clients open communication about their estate plan to prepare heirs to receive an inheritance. However, many clients may be reluctant to share their entire estate plan with their children and grandchildren. Digital estate planning platforms can enable personalized views of an estate plan with options to limit the information shared with heirs. This will allow financial advisors to engage future generations in estate planning discussions in a way that meets the wishes of their clients. These discussions provide a framework for financial advisors to build relationships with future generations and improve the ability of wealth managers to retain assets during wealth transfer events.

Over the next 25 years, up to $ 68 trillion in wealth will be passed down to Millennials and Gen X heirs in the United States. Disruptive estate planning technology will make it easier for financial advisors to prepare clients for this upcoming wealth transfer.

Vanilla, a Wealthtech startup disrupting the estate planning space, is leading the charge by creating a platform with automated estate reports, intuitive visualizations, and legal support for financial advisors. Their technology saves financial advisors time, automates the tracking of a client’s estate plan, and provides an accessible digital representation of the plan.

FP Alpha, another tech company focused on empowering financial advisers, has developed artificial intelligence that can interpret estate planning documents and instantly generate plan analysis. Advisors and clients can upload existing estate planning documents to generate key insights and quickly identify areas for improvement in the plan. Depending on the complexity of the estate plan, this technology could save financial advisors hours of analyzing trust and estate documents to rebuild an understanding of their clients’ plans. Wealth managers who take advantage of this technology will increase the ability of their financial advisors to serve more clients, while enabling them to provide better advice.

As wealth managers prepare for a huge wealth transition to millennials and millennials heirs, an effective digital strategy has become increasingly important. Today, the practice of estate planning within wealth management is a highly manual and time-consuming service offering where digitization has lagged behind. New technologies are disrupting estate planning with artificial intelligence, improved visualization of estate plans and automated reporting. This technology will make estate planning services more accessible to the high net worth segment, providing a unique opportunity for wealth managers to engage previously underserved clients who are the future of their industry.

Matthew Berkowitz is Senior Director, responsible for the practice of US Wealth and Asset Management Strategy, and Eden Afriat is Senior Consultant, both at Capco.


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