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Digital Assets 101: How to Account for Digital Assets in Estate Plans

Digital assets are a popular topic and an ever-important aspect of estate planning with today’s digital age. Even simple accounts such as Facebook and Twitter have tremendous transferable value to beneficiaries. However, beneficiaries and clients alike believe that merely sharing a password or access gives the beneficiaries the rights to the account. Ironically, this may constitute a violation of the law if this is how a digital asset is handled in an estate. It is important to understand the transferability, the value and how to provide instructions for transfer.

When planning for digital assets in an estate plan, it is important to help your clients identify their digital assets. Certainly, the best place to start is with an inventory. Try asking them if they have some of the popular digital assets and explaining the intrinsic value to the beneficiaries. Once they have a comprehension of the value, they are more likely to identify digital assets they own. While they may not initially see value in digital asset planning, photos, videos and stories go a long way in legacy planning. Helping clients realize the value of legacy planning can assist with digital asset planning.

After taking inventory, you will have to familiarize yourself with some of the policies of a particular digital asset. Digital assets can be transferred in similar ways to normal assets. Some will allow the account holder to appoint a legacy person and some need specific language in wills or trusts to transfer the digital asset. The only caveat is that some assets (unlike liquid and tangible assets) are not considered property and simply cannot be transferred. Most of this occurs in loyalty reward programs.

One of the most popular digital assets is Facebook. The reason for its popularity is because of the memories it holds. A user can appoint a legacy sponsor to handle the account once someone has passed. The user can also choose to delete the account. The challenge here is similar to that of a beneficiary designated account, someone must be chosen prior to death. Once someone dies and Facebook finds out they memorialize the account. This basically freezes the account and provides no access. Just like setting beneficiary designations (and revisiting them), digital assets that have legacy access should have those designations set and revisited periodically.

Loyalty reward programs are equally as popular. While most are not that friendly within an estate, some have clauses that can be accounted for in legal documents. Let’s take American Airlines. American Airlines has some language in its AAdvantage program terms and conditions which does not specifically allow transfer after death, but the airline gives itself a “loophole” to transfer the miles after approved legal documents have been submitted. Accounting for specific language in estate documents can be vital in transferring a specific digital asset with significant value. This is an excellent example accounting for digital assets within a will or trust document.

Digital assets can be tricky when accounting for them in an estate plan. The key is to take proper inventory, gather some familiarity or help and account for transfer. The great news is, this is an excellent conversation starter, a differentiator in practice and a way to provide great value to your clients. In the digital age we are in, digital assets are becoming more important in estate planning. Take the time to learn how to account for them in estate plans, it will be well worth it.

 

Scott Huff_Updated

Scott Huff is the CEO of Yourefolio.

 


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Two Ways Planners Can Increase Their Value Proposition

A recent study by Capgemini revealed that, despite robust portfolio returns, only 55.5 percent of high-net-worth investors feel a strong connection to their planners. If returns are on the rise, then where are planners falling flat?

We have recently experienced one of the longest bull markets in history (which despite recent market events, experts say is not yet at its end), and not only have investors been used to steady returns, they have continued to move toward indexing to get those returns at a lower cost. The reality is that investor satisfaction is less about market returns and more about the entire value the financial planner provides. The financial services profession is as impacted by technology, demographics and value provided as any other economic sector.

If you don’t continue to evolve your business model by creating more value for customers, you won’t sustain growth or even achieve the same level of success. However, some planners are resistant to making the changes necessary to enhance their business model and increase the loyalty of their clients because their existing model is what made them successful in the first place.

Our profession continues to be dominated by baby boomer planners, who are generally more resistant to adopting integrated technologies that can provide scale to their business and greater freedom to focus on client acquisition and relationships. Generation X and millennial planners, on the other hand, are proactively seeking out new technologies and ways to achieve stronger connections with their clients.

Planners who focus only on asset allocation as a core competency are most likely falling short of the broader value clients now expect and are willing to pay for. To improve their business models, planners should consider the following:

1.) Emphasize financial planning aimed at providing economic wellness, fulfillment and confidence—and the risk-adjusted strategies that can help clients get there.

While asset allocation is a key component of the wealth management process, it shouldn’t stand on its own as a planner’s core value proposition. Planners must shift their perspective and offer clients what they’re really looking for.

The need for value-add services, such as estate and tax planning, is being driven by the impending “Great Wealth Transfer,” as roughly $30 trillion is expected to switch hands from baby boomers to their heirs over the next 30 to 40 years, according to Accenture. Right now, most of these assets still rest with baby boomers but they are increasingly transitioning to spouses, Generation X and millennials.

Getting younger investors in the doors of your business starts with understanding how they view money. Remember that since many newer investors acutely felt the impact of the Great Recession at a formative period in their lives, they may have a greater emotional attachment to money than their parents. This has manifested as a strong tendency toward risk avoidance and a desire to focus on maintaining wealth rather than growing it.

Planners should therefore offer services and counsel that cater to this mindset, relating to clients on a personal level rather than just finding an appropriate asset allocation.

2.) Adopt and implement the types of financial technologies that investors are demanding in order to track their wealth.

As predicted, the advent of robo-advisers did not put financial planners out of business, but this technology has opened an important dialogue about the value a planner provides to the modern investor.

We live in an age when on-demand services like Amazon Prime and Uber have become the new normal, and financial services are no exception. Investors today want constant access to their accounts, so planners risk extinction if they continue to manage client relationships with a yellow pad and quarterly phone calls. Modern clients demand a digital portal where they can easily access their money and your advice 24-7.

Many planners are hesitant to adopt this technology because they fear it will diminish the need for their role, but that couldn’t be further from the truth. Clients might enjoy the ease of access a portal provides for quickly updating beneficiary designations, but when faced with a significant event like a death in the family, they will turn to you for professional guidance. No computer will ever be able to provide trusted counsel for complicated personal scenarios.

As a planner, understand that your greatest value-add may not be having a hand in every single touchpoint of your business. In fact, planners who focus on listening and serving the overall financial well-being of their clients, while delegating non-essential tasks to technology, will build the stronger connections necessary to increase client satisfaction.

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As president and chief executive officer of Kestra Financial, James Poer is dedicated to helping independent financial advisers fulfill client goals through a unique integration of technology and service. Kestra Financial serves independent financial advisory firms with varying business affiliations, including independent registered investment advisers (RIAs) and hybrid advisers.


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5 Tips to Protect Your Practice from Cybersecurity Threats

Spring is finally here and this time of year always brings a renewed focus on getting healthy for summer beach vacations. But now that a fresh season is among us, it’s time for us to also focus on the cyber health of our practices.

According to Security Magazine, there is a hack attack every 39 seconds on average. As a firm, we at Kestra Financial are always doing whatever we can within our internal systems to protect the privacy of our partner firms and their clients.

However, there are a few things you as an adviser can do proactively for added protection.

Train your staff to be vigilant. Businesses often don’t realize the biggest threat to their cybersecurity health is, unintentionally, their employees. To help mitigate this threat, train your staff to be weary of emails that claim to be from trusted partners but don’t appear to make sense (these are likely phishing attacks). Also, warn your staff to not type username and password information into a website simply because it asks for it. This is the most common way our advisers get breached. Odds are, if something doesn’t feel right, it probably isn’t. When in doubt, proceed with caution.

Practice safe web behavior. Do not type sensitive information into websites without an “https” prefix included as part of the URL. Always use strong passwords that are at least eight characters or longer and include a mixture of symbols, letters and numbers. As a rule of thumb, if your password is in the dictionary, it is likely not strong enough. Also, be sure to never use the same password across multiple websites.

Beware of ransomware. When it comes to cybersecurity, it’s not just about privacy, but also access. Sometimes, instead of stealing your data, hackers will encrypt your computer and hold it for ransom until they are paid. Nowadays, it is fairly simple for hackers to conduct clandestine, international transactions, especially with anonymous digital currencies such as bitcoin. With this in mind, your backup strategy is almost just as important as your cybersecurity strategy. On a recurring basis, practice backing up your data and then re-uploading it back into your system. If you have a strong backup strategy, you can make yourself immune to ransomware attacks.

Avoid using obscure, free software downloads and file-sharing utilities. This is frequently how hacking activities start and spread. Free video conversion utilities are especially common and should not be downloaded unless they have been purchased from a trustworthy source. Even if only one employee downloads a virus, it could spread across the firm.

Heed warnings. If you are using a browser and get an error message noting an invalid web certificate, you should never continue. Websites oftentimes get hijacked, and the only way to know if your website is actually the one you were looking for is if there is a valid certificate. For example, hackers can screenshot what the Gmail login page looks like and fool you into thinking you’ve landed on that page, even though they’ve redirected you to their site. When a website masquerades as another website, it is called the “Man-in-the-middle attack,” and it should be avoided at all costs.

In conclusion, if you suspect that you’ve been hacked or your data has been stolen, act quickly. At Kestra Financial, we encourage our advisers to contact us for assistance whenever they suspect they may have fallen victim to cyberattack.

Kevin Witt

Kevin Witt is the chief technology officer for Kestra Financial, where he leads the company’s drive to provides its advisers with innovative tools and technology that will empower their success. Kevin’s team is responsible for the design, development and implementation of a wide portfolio of applications used by employees at the Kestra Financial home office and advisers in the field.

Editor’s Note: A version of this post appeared on Kestra Financial’s blog and can be found here