Optimizing $68T wealth transfer means meeting client needs throughout estate value chain
This article was produced in partnership with Estateably.
Mallory Hendry of Canadian Lawyer sat down with Ari Brojde, founder and CEO of Estateably, to discuss why lawyers are in the best position to optimize this transfer.
It’s no secret that North America is on the cusp of the greatest wealth transfer in human history, with an estimated $68 trillion in assets set to trade hands from the Baby Boomer generation to their beneficiaries. And while Ari Brojde, founder and CEO of Estateably, is hearing rumblings from various professional service firms looking to be a part of the administration of those assets, there’s no other industry better poised to optimize the transfer, in terms of tax minimization and other strategies, than the lawyers already doing estate planning work.
“If they’re only drafting the documents and don’t offer administration services to execute those estate plans, they’re only capturing a single part of the estate value chain and associated growth loop,” says Brojde. “If law firms are interested in capturing this great wealth transfer, they’re best served to offer administration services.”
The value chain is the premise that one customer today can end up being multiple customers in 20 years. Someone who’s accumulated wealth, needs estate planning work, and estate planning lawyers sit down with the client to find out what their asset base looks like, what their goals and objectives are for passing on those assets and generate the documents that stipulate the administrating of that wealth. When a life event occurs such as death, incapacitation, or creating a trust for various reasons and it’s time for those instructions to be executed, the lawyer who created them – and already has a handle on the estate and the instructions – is nowhere to be found. By not offering administration services, they’ve effectively severed their relationship with the beneficiaries – and once they lose that contact with that family, it’s hard to retain the new generation moving forward.
“The interesting thing about fiduciary relationships is they create many potential clients,” Brojde notes. “All those beneficiaries that have inherited the wealth have amassed new wealth that will also need planning.”
It's a cycle that can exist: the lawyer deals with the parents, plans for their estate, creates the documents and – if they offer administration services – helps with the transition of those assets to the younger generation and ends up with multiple beneficiaries who now have assets they need help to plan for, returning to the top of the value chain.
As a software executive, one of the most important metrics Brojde uses to understand business profitability is Customer Lifetime Value to Customer Acquisition, a KPI that measures the relationship between the lifetime value and the cost of acquiring that customer. Most profitable companies have a high ratio – a lot of revenue from customers that are costing little to acquire – and for estate planning lawyers who also offer administration services, the lifetime value of a family to a firm can be high.
Based off the estate value chain, the more beneficiaries as customers the more revenue they’ll drive for firms in the long run. Instead of having a single customer whose lifetime value is $5,000, for example, by including their five beneficiaries, that value could be $25,000. It keeps compounding, but the cost to acquire those new customers is low and that profitability ratio improves.
“The goal of law firms is to service a particular family for generations – it’s good business,” says Brojde. “If you don’t offer estate administration you’re leaving revenue on the table.”
When it comes to why estate planning lawyers have shied away from estate administration, conversations with potential customers identified two main reasons. The first is the lawyer feels they haven’t amassed the required level of expertise, and because administration is full of risk they don’t want to open the firm up to increased liability. The second reason is that historically the work of administrators is labour intensive, tedious and paper-based and therefore not very profitable.
Estateably, modern estate and trust administration software automates and streamlines many manual processes, which helps firms that do administration do it more profitably. It also has embedded jurisdictionally aware task lists “so that someone who hasn’t done administration before can follow the guides provided and ensure they’re maintaining compliance with regional and local regulations – and the risk the firm takes on is less because the software helps guide them,” says Brojde.
As the benefit of being part of the conversation when the assets are being transferred is becoming more apparent, Estateably has seen a corresponding uptick in interest in its software. Law firms and other professional services firms that offer estate planning services want to get into estate administration because they recognize the value – especially when they’re forced to outsource it or give business away to a firm that does.
“Insurance, investment and accounting firms looking into this represents a threat for law firms but also a massive opportunity,” Brojde says. “At the end of the day, it’s the lawyers that have the most expertise regarding how things should be done because they understand the process better than the other segments – and Estateably as a great modern tool to help manage that administration process.”
Ari Brojde spent more than a decade working as a private wealth manager for two of Canada’s largest financial institutions before founding Onist, the world’s first virtual family office platform, followed by Estateably. Ari is an integrated wealth management SME, a CIO-Certified Blockchain Professional and a Certified Executor Advisor.
