A sober second thought on advisor as executor

A sober second thought on advisor as executor

A sober second thought on advisor as executor With baby boomers reaching retirement age questions around inheritance and executorship are increasingly a part of the advisor-client conversation. A key issue bound to come up at some point will be that of executorship—who is watching over the estate of the deceased after death?

Today it is common to find advisors acting as the executor of a client’s estate. But there are many who recommend against advisors taking on this role. In a video running on the WealthProfessional.ca, experts point out the potential pitfalls.

“I think people who are thinking of taking on an executor might think the advisor is suitable because they have knowledge of the estate`s taxes and investments” says Mark O’Farell, president of the Canadian Institute of Certified Executor Advisors. “Personally I think it is a big mistake. I don’t think the advisor is suited to act as an executor.”

O`Farell points out that b
oth IIROC and the MFDA prohibit advisors from taking on an executorship while still acting as advisor. To take on executorship an advisor would have to give up their role as advisor and step down to avoid potential conflict. This is not always the smartest business move. As our experts point out the role of executor is a time consuming one and, at the end of the day, is not likely not as lucrative as that of advisor (though fees can be charged).

As well, it is often that case that other financial concerns surface after death. The deceased may have had other outstanding loans that were not disclosed to the advisor throwing the financial picture into disarray. Certainly, some kind of insurance protection is needed in the role if it is to be taken on. 

It is also the case that legislation surrounding the role of executor changes fairly often. Considering how rapidly legislation shifts a lawyer would be a wiser choice for executor.
All-in, according to the experts it is smarter for the advisor to act as a certified advisor to the executor of the estate. By doing so the advisor avoids potential conflict and can avoid having personal assets drawn into a conflict with the estate of the deceased. 

Even if the role of the executor seems like a natural extension of the relationship of the client, stepping in to an executor role is a step that advisors need to think about carefully. 
  • Freeda Hussain, CFP 2014-05-21 11:14:31 PM
    Because of the potential conflict of interest, I advise clients that due to regulations, I'm unable to be their executor, trustee, POA etc.... In this way, we continue to have a good ongoing relationship.
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  • Jeff Sanford 2014-05-22 3:23:22 PM
    Good point Freeda. Maintaining the relationship is key.
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