Many children will receive an inheritance after their parents pass on. In some cases, this may include significant assets. If you currently are or may become one of those individuals, it is critical to figure out how you plan to manage this shift in wealth. The passing of parents is a trying and emotional time, and everyone will most likely be under tremendous stress and trying to manage grief while staying on top of finances, which now includes making important decisions regarding your inheritance. There are several options when juggling such a critical decision. One of the options is whether to continue working with your parents’ financial professional or to find one of your own.It is essential to weigh the pros and cons before making financial decisions that could greatly impact you and your family. There is no right or wrong answer. Every individual and family have their own unique set of circumstances and financial goals.
Pros of Remaining with Your Parents’ Financial Professional
Familiarity with their account—
Your parents’ financial professional is familiar with their account or multiple accounts, so there would be only a minor or no learning curve for them during the inheritance process, aside from learning about your strategy ideas and goals. Having them on your side could be very beneficial in the continued preservation and growth of the wealth.
Access to continued guidance—
You would have the ability to get the guidance you may need without having to expend time and resources searching and researching candidates and firms to switch to.
Technical knowledge of their potentially complex strategy—
Your parents may have had a complex financial portfolio. Their financial professional may have had specialized knowledge that benefited your parents’ long-term strategy, and you may consider giving them a chance with yours.
Experienced guidance during a difficult time—
Your parents chose a trusted financial professional they relied on for sound advice. If you value their judgment, continuing with that advisor could offer stability and insight when you need it most.[i]
Cons of Remaining with Your Parents’ Financial Professional
Different expectations around communication—
While your parents’ financial professional may have served them well, you might prefer a more open and detailed approach. It’s important to work with someone whose communication style aligns with your own expectations and comfort level.
Alignment of values and ethics—
It’s important to ensure that your financial advisor’s ethical standards resonate with your own. While certain practices may have worked well for your parents, you might have different expectations or boundaries. Taking time to reflect on what feels right to you can help you make a confident and values-driven decision.
Different risk tolerance level and financial goals—
Your parents’ risk tolerance, financial goals, and investment philosophy may be different than yours and the skillset of their financial professional may not align with what you are looking for.
The financial professional may not be as engaged with you—
Your parents’ financial professional may not currently be interested in signing on new clients or they may be nearing retirement and may not be as engaged with you as they were with your parents.
May not be suitable or have the experience for your specialized needs—
There is also the chance that your specialized needs are different from your parents’ and their financial professional may not have the experience or knowledge to be as beneficial for you.
Other Essential Considerations
Make sure to do your research—
It can be helpful to do your own research and determine if your parents’ financial professional is who you should use, or if there may be other more suitable options. A thorough evaluation helps you make confident, informed decisions and avoid potential roadblocks down the line.
Communicate as clearly as possible—
When you meet with your parents’ financial professional, practice open communication and lay out your short-term expectations, long-term goals and any concerns you may have. A financial professional worth working with will be open to listening and customizing a strategy that focuses on you.
Don’t feel obligated to stay with your parents’ financial professional—
What happens to the inheritance after you receive it is up to you. It is not up to your parents’ financial professional, and you have no obligation to remain with them. It may be beneficial to stay with them, but it may also be practical to find someone else who aligns with your wants and needs which may be different than your parents’.
Consider Scheduling a Meeting with Your Parents’ Financial Professional to Discuss Your Questions and Concerns
Getting an inheritance can be a life-changing event. Coming into a significant amount of money and assets, especially if you have never had access to so much, can pose certain challenges. Historically, inheritances don’t last. This is so common it is described as “shirtsleeves to shirtsleeves in three generations.”[ii] There is an oft-quoted statistic that 70% of wealthy families lose their wealth by the second generation and 90% lose it by the third.[iii]You can break this cycle by assessing your ability and skillset when it comes to managing inherited wealth and recognizing where you can turn for help. You may want to keep it with your parents’ financial professional, keep only a portion of the assets with them and move the rest to another of your choosing or move it all to a different carefully selected financial professional you feel aligns more with your view of the future. At the end of the day, transparency and communication is key when face-to-face with this new responsibility. Again, weigh your options carefully. Don’t make impulsive or emotionally driven decisions. We can help. Schedule an appointment with us today and allow us to give you an honest assessment of your options.
Important Disclosures:
Content in this material is for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by LPL Marketing Solutions
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Sources:
[i] 5 Ways A Financial Advisor Can Help You Navigate Your Inheritance | Bankrate
[ii] Inheritance planning: Beating the “shirtsleeves to shirtsleeves” adage - RBC Wealth Management
[iii] Generational Wealth: Why do 70% of Families Lose Their Wealth in the 2nd Generation? | Nasdaq