From the November 2006 issue of Investment Advisor • Subscribe!

Advisors: Natural Facilitators

Generations welcome advisors' help in tackling wealth transfer talks

Last month we addressed how MainStay Investments' 2006 edition of the Across Generations research identified, among mass affluent investors, the communications disconnect between generations when it comes to matters of financial planning and wealth transfer. The research further sought to discover how advisors could help such clients with these difficult conversations. It turns out that clients welcomed proper financial advisor participation in facilitating "difficult" conversations between clients and their heirs. This month, we'll address how to turn that discomfort into an opportunity.

MainStay found that the inertia regarding family/heir communications represents a tremendous opportunity for the advisor, especially when you consider that nearly half of both children (47%) and parents (46%) surveyed agreed that using the same financial advisor would make managing wealth transfer easier.

By providing this much-needed service and connecting with extended family members, advisors maximize the likelihood that the assets will remain under their management once the assets have changed hands.

The Role of the Advisor

Clearly, this is a topic one doesn't launch into matter-of-factly and should be the domain of only a client's primary financial advisor. But for strong client relationships--ones in which advisors maintain a high level of trust and a long track-record, an advisor can do his client a great deal of good by offering to help facilitate the transfer-of-wealth discussion among family members.

Consider the following tactics:

Involve the Spouse. If applicable, an advisor should involve the client's spouse in a few meetings throughout the year. It's the most obvious tactic, but one that is often overlooked or taken for granted. Developing a stronger relationship with the spouse will help advisors solidify their position and instill confidence in his/her ability to continue managing the assets if a spouse were to pass away unexpectedly.

Learn More About the Client's Family. Knowing more about a client's parents, siblings, children, and grandchildren can provide an advisor with the opportunity to deepen relationships across generations. Common life events, such as a birth, engagement, marriage, divorce, graduation, or retirement, can be a powerful motivator and catalyst to spur clients to take action. Advisors that are more aware of these "family events" will find it easier to initiate a conversation around intergenerational wealth management.

Relate to Clients on a Personal Level. When it comes to discussing wealth transfer, advisors should draw on their own personal experiences or those of other clients to initiate an open dialogue with a client. A client may have an easier time understanding and relating to personal "stories" rather than to something that is perceived as a "sales pitch." Since the opportunity to discuss wealth issues may present itself at anytime, when meeting with clients an advisor should always be prepared.

These small tactics can yield big results. Clients are more receptive to the gesture than advisors might think and there is a high probability that it will be greatly appreciated, even if the client doesn't require the advisor's assistance. Moreover from a practical standpoint, having the courage to tackle this difficult issue will certainly help protect the advisor's business.

As MainStay's research shows, advisors are natural facilitators when it comes to helping their clients navigate the tough discussions about wealth transfer. Arm yourself with these practical tips so that you're prepared whenever a family crisis like this shows up at your office door.

Pulling it Together

Where does the hard data come from to support these insights? Now in its sixth year, the MainStay Across Generations survey measures the differences in investment behaviors and attitudes among generations. The 2006 Across Generations study was conducted by an online research firm in May 2006.

The study polled 1,512 individuals between the ages of 27 and 83, covering four different age groups: GenXers (1965-1979), Late Baby Boomers (born 1956-1964), Early Baby Boomers (born 1946-1955), and Seniors (born 1945--1923). Respondents had at least $250,000 in investable assets. The analysis was broken down by generational cohorts and sub-divided by gender.

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