Jonathan Hooper highlights the importance of seeking collaborative legal advice early to avoid mistakes
The scope of an advisor’s work and an advisor’s expertise keeps widening. The umbrella of ‘holistic wealth management’ or ‘comprehensive goals-based financial planning’ or any other phrasing of the same concept boils down to a new mandate for advisors: offer your clients a service, don’t just distribute investment funds. Part of offering those services, though, means advisors begin operating in fields traditionally reserved for other professionals and developing new areas of expertise. Tax planning work can run quickly into the technical world of CPAs, while estate planning services can quickly overlap into areas that require legal expertise.
Jonathan Hooper has made a point of building collaborative relationships with advisors. The partner at Tupman & Bloom LLP in Halifax is an expert in wills, estate administration, probate, trusts, and estate litigation. He has seen financial advisors offer more services related to client estate plans, and has worked from the legal side to ensure those plans are an accurate reflection of the client’s goals. As advisors wade into the world of estates, Hooper suggests that they take a collaborative approach with their lawyer referrals. The legal side of the estate process, he explains, can have wider impacts than some advisors might initially think.
“There are some advisors who will send me a package of instructions and say ‘let me know when it's done.’ Others will have more of a robust conversation and sit on the meeting so that they can understand what's going on. This is, generally speaking, my preference, and I think that's the best approach,” Hooper says. “That way I can understand not just their but what they have and what they do, but also what the what the wealth advisor has been telling them and what their expectations are.”
The first benefit of that more personal collaboration, Hooper says, is in making the clients feel more comfortable. They likely have a longer and deeper relationship with the advisor, so having them in the room with him and the client can put everyone at ease. The advisor can also use their knowledge of the client’s finances to help answer tough questions that the client might not be able to answer easily.
Hooper also likes that conversation to happen relatively early in a client’s onboarding process with their advisor. That’s because, in his view, a legal perspective on the estate plan can actually prompt clients and advisors to revise the goals and objectives that inform their financial plan. He notes that certain products and investment strategies that advisors recommend do not always come with a full consideration of their estate implications. The wealth management industry remains one where investment tools come first, but an estate professional can help show where more flexibility is needed, based on a fully informed view of the estate plan.
Designating benefits on registered investments, life insurance, and tax free savings accounts can have significant estate planning implications that Hooper says not every advisor takes into account. Clients and advisors need to understand the relationship between those designated beneficiaries and their will, whether those two sets of choices interrelate or not and if the designated beneficiary of a product and the beneficiaries in a will are not the same people, there needs to be a consideration of whether there are enough assets to fund both.
Joint ownership, too, comes with more estate planning considerations than many might assume. While spousal joint ownership is straightforward, ownership with non-spouses makes for a more fundamentally challenging situation. A joint holder of an investment account or a piece of real estate can trigger many fundamental consequences that Hooper believes need to be considered, even if it’s just to avoid probate.
“As soon as someone is added jointly on an account, or as soon as you put a beneficiary in place, there are, there are legal effects right that affect your overall estate plan, that that may not be known to the wealth advisor,” Hooper says. “And certainly the wealth advisor is not in a position where they can give legal advice.”
Despite the growing expectation that advisors work on client estate plans, Hooper highlights the necessity of bringing in a lawyer at key stages. He can offer considerations that an advisor might not have thought of. He can do so while staying in his lane, leaving the investment and financial planning conversations with the advisor. Lawyers like Hooper with experience in estate litigation can also help point out weaknesses in an estate plan that could lead to issues down the road.
Hooper also says there is plenty of space in the estate planning world for advisors. Information gathering, for example, is a key part of the estate plan and something that advisors are particularly well positioned to do. Acting on that information, however, should be done in consultation with lawyers.
“A wealth advisor may be getting pressure to do certain things, but they should really stay within the scope of what they're authorized and, quite frankly, insured to do,” Hooper says. “This is something that we need to make sure of as lawyers, that we're not giving advice that isn't legal advice. And it's the same thing with accountants and it's the same thing with wealth advisors. We need to stay in our lanes of expertise. So for a wealth advisor, when they're starting, absolutely fine to gather all the information, to even organize it, and to put it together and to ask questions of an estate nature, provided that they're not giving any advice, because that truly is the value that a lawyer will give, because it's not a guess.”
