Young people might also believe creating a will is an expensive and arduous process. And if they’re not working with a trusted advisor, they don’t likely have anyone to inform them of the benefits of a will, even at this early stage in their life.Pekic/iStockPhoto / Getty Images
Are you a professional financial advisor? Register for Globe Advisor and then sign up for the new weekly newsletter on our newsletter sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know.
No one likes talking about death, but avoiding the conversation with clients, especially young ones, means there’s a demographic that’s being underserved.
A recent survey that Ipsos conducted for RBC Royal Trust shows that despite the global pandemic, Canadians haven’t been in any rush to create a will. While more than half (58 per cent) of the survey participants say they understand estate planning fundamentals, another 52 per cent admit they don’t have a will in place.
When it comes to young people aged 18 to 34, 70 per cent say they don’t have a will.
What the pandemic did do, though, is open conversations among Canadians of all ages around estate planning, even if it didn’t lead to executions, says Leanne Kaufman, president and chief executive officer of RBC Royal Trust in Toronto.
As drafting up a will can sometimes be a drawn-out process, we may yet see how the pandemic influenced action around wills in the coming years, she adds.
In the meantime, there’s a lot of work for advisors to do around educating young people about the importance of wills. Helping young people in this area can also be a value add, especially as many have been turning to do-it-yourself (DIY) investing solutions instead of advisory services.
One of the main reasons young people don’t create wills is because they don’t understand the consequences of dying without one, Ms. Kaufman says.
“If young people understood how their assets, however small they may be, would be divided if something were to happen to them and they didn’t have a will, they might choose to get a will just to be able to have some control of where those assets go.”
Across the country, intestacy laws prescribe how estates are distributed.
“There’s no room for discretion and most young people, if asked, would probably want their assets distributed differently than those laws set out,” Ms. Kaufman says.
For example, a young adult’s estate could default to their parents when they might want to give their money to friends, siblings or charities. In fact, the RBC Royal Trust survey shows that 53 per cent of young Canadians with a will have requested to include charitable giving.
So why do so few young Canadians have a will in place?
“People don’t like to think about their own mortality or potential death and these events where a will may be invoked,” says McKenzie Esposito, wealth advisor and portfolio manager at National Bank Financial Wealth Management in Edmonton. “[It] seems too far away for a young person to give them much thought.”
There is also a lack of education and guidance on why it’s a good idea for a young person to have a will, he adds.
“They believe that because they may not have a family or substantial assets, it’s not necessary for them to have a will,” he says.
Young people might also believe it’s an expensive and arduous process. And, if they’re not working with a trusted advisor, they don’t likely have anyone to inform them of the benefits of a will, even at this early stage in their life, he says.
Mr. Esposito says advisors should position wills with young people as a “rite of passage” or step toward becoming an adult.
“We had a client who would purchase each of his children’s wills when they turned 18. We look to replicate this process for all clients’ children that are coming of age,” he says.
The ‘what-ifs of being incapacitated’ hits home
Conversations around creating a power of attorney and a personal directive are also important.
In the case of power of attorney, a young person would designate someone to make financial decisions for them if they were unable to do so. In the case of a personal directive, also known as an advanced directive, this would allow someone to make personal decisions for clients, especially around medical care.
“This topic is our leading message when working with clients regarding end-of-life planning,” Mr. Esposito says. “A will may not resonate as their assets may be inconsequential but discussing the what-ifs of being incapacitated usually hits home with the younger clients as well as their parents.”
If advisors don’t have a lot of young people among their client base, they certainly will have clients with children, or even grandchildren, of this age.
“It’s a wonderful way to connect with that next generation, which is probably something that advisors are looking to do,” Ms. Kaufman says.
Going digital for a younger generation
RBC’s banking and wealth management divisions have partnered with Epilogue Wills, an online wills platform, to help Canadians currently without wills get one quickly and inexpensively.
“It might be something that gets them to take action on this in a way that maybe a more traditional, historical way of getting a will done may not,” Ms. Kaufman says, adding that all digital will platforms can provide value in this way.
Ron Haik, wealth advisor and client relationship manager at Nicola Wealth Management Ltd. in Toronto, says conversations around wills don’t need to be complicated. Advisors should be checking in with clients to ask if they have a will in place and when it was last updated.
“Right now, financial advisors are in a great position as [do-it-yourself (DIY)] investors may have been hurt hard in the past six months as almost all assets classes have fallen,” Mr. Haik says. “Many have not seen a down market or an extended period of muted or negative returns.”
Being able to coach and guide DIY clients beyond investing through goals-based planning and matching an appropriate strategy that includes the client’s risk tolerance will lay the foundation for a long-term relationship, he says.
“Part of that planning includes estate planning,” he points out.
For more from Globe Advisor, visit our homepage.