The College for Financial Planning in Denver last year surveyed 365 financial planners about clients' financial knowledge. It turns out clients are least smart about estate planning.
The planners rated clients on the following scale: 1=not knowledgeable, 2=slightly knowledgeable, 3=knowledgeable, and 4=very knowledgeable. Here's how clients scored:
Basic Budgeting: 2.7
Retirement Planning Issues: 2.3
Financial Goal Setting: 2.3
Investment Issues and Strategies: 2.2
Tax Planning Issues: 2.0
Insurance Issues: 1.9
Estate Planning Issues: 1.6
Source: College for Financial Planning 1998 Survey of Trends
Attorney John Scroggin, a 25-year estate planning veteran from Roswell, Ga., has observed trends in his industry over the years. One interesting change is that his clients no longer want to give heirs as much wealth as possible.
"Now people are coming to us and saying that inherited wealth can be a detriment to character development," Scroggin says. Bequeathing a large estate to children can remove their career motivation.
One way to put constraints on inherited wealth is to create a Family Incentive Trust, Scroggin says. Structured as a Dynasty Trust, it has a safety net and goal incentives for heirs. It can provide for charitable contributions as well.
In which area do consumers say they need the most financial planning assistance? Estate planning--89% of respondents say they need help with it.
A 1998 survey by Boston-based Dalbar and the Atlanta-based International Association for Financial Planning (IAFP) asked 7,000 moderate- and high-income consumers their opinions on using financial advisers and estate planning.
The group seemed to grasp an estate plan's importance as well. Twenty-two percent of respondents said estate planning advice affects their ability to reach their goals.
Of the respondents who had created an estate plan, 66% said they felt comfortable with their retirement finances. But only 37% of those without an estate plan felt at ease with retirement finances.
In addition to providing comfort, estate planning helps clients feel prepared for an emergency. Of respondents who had created an estate plan with their financial adviser, 43% said they felt prepared for a crisis versus only 24% who felt prepared without a plan.
Developed Estate Plan 43%
Altered Their Lifestyle 40%
Created a Will 39%
Made a Major Purchase 37%
Changed Insurance 37%
Defined Goals 36%
Saved More 35%
Restructured Debt 32%
Restructured Investments 31%
Made New Investments 31%
Source: 1998 Value of Advice Study by Dalbar and IAFP
