Intergenerational Wealth Management: 8 Steps to Becoming a Family Advisor

For me, it’s a given in life that nothing is more important than the happiness of my children. That’s the “big issue” that trumps all other concerns, including personal finances and wealth management. And yet…family and wealth are not mutually exclusive. The financial well-being of our loved ones is often an important component of their happiness and success—and we all strive to ensure that our children receive an inheritance that puts them in an advantageous position for the life challenges ahead. 

But as wealth passes from one generation to the next, do today’s forward-thinking financial advisors recognize the opportunity that is at hand? And are they philosophically prepared to alter their business models to accommodate the needs of inter-generational wealth management? 

From my perspective, a good way to answer these questions is by tapping into my experiences serving the financial services industry. But I’d also like to tap into something else—namely, my experiences as a husband and father who is very cognizant of the issues that surround inter-generational wealth management (and who has an advisor who understands and responds to these needs). There are eight recommendations I’d like to make to financial advisors:

Step 1: It’s all about building relationships that last.

It’s fine to be a financial advisor who wants to manage the assets of your client’s children. But how much more useful it is to be an advisor who is willing to take the time to advise and educate them, and who thoughtfully assists them in improving all aspects of their lives? That’s the difference between being a financial advisor and a family advisor. 

Let me give you an example: In my family, at each child’s 18th birthday, we set up an IRA for them with $1,000 in it. Furthermore, on each ensuing Christmas, we invest half the money each child receives from relatives into the respective IRAs. The kids work with the advisor to make investment decisions—for example, one child invested in Apple and Sony because those were companies he knew, and his portfolio is doing quite well! 

As my kids enter their 20s, they’ve learned to rely on our advisor for all sorts of great advice on financial and life matters. For example, when the time comes, I fully expect they’ll be asking him for advice on what real estate they can and cannot afford, or whether a certain pricey car fits with their lifestyle and budget.

By helping my children make thoughtful, well-reasoned decisions that improve their lives, my advisor adds value that you can’t put a price on. 

Step 2: Don’t offer a substitute for parental advice—rather, augment it. 

As a father, I’ve given my share of advice to my kids. But I never think that our advisor’s contributions are infringing on my parental prerogatives. Our advisor is the expert on financial matters; he’s the one to ask. And as far as him giving advice that extends beyond the financial realm, no problem. My kids see him as a resource—not a parental replacement. This is an important point for you to make to your clients as you take a more active role as a family advisor.

Step 3: Encourage two-way communication at comfortable intervals, with no data overload

You do not want to be an advisor who cranks out report after report and sends them off to clients who do not have the time or inclination to sift through reams of data. Rather, when managing inter-generational wealth, it’s the quality of your communications that matters, not the quantity.

Send the occasional article that takes a controversial stand on wealth management (and perhaps your role in it)—and be prepared to discuss it. Call when you have a constructive suggestion or recommendation that truly adds value, not because you feel obligated to check in once a week, or once a month or six months. Make every point of contact a worthwhile one for your clients. And always encourage them to call you with questions. As it turns out, in our household, we call our advisor at least as often as he calls us. It’s an arrangement that serves us all well.

Step 4: Train your clients that the plan is the key—and that they shouldn’t write a check without one.

A quick aside that’s about family assets, rather than inter-generational wealth per se. My wife recently had a question about making a charitable donation, so she called our advisor. He asked her what she was trying to achieve with the donation—and equally importantly, what we were trying to achieve with our overall giving as a family. 

These questions were illuminating, not only because we were prompted to analyze precisely why we say “Yes” to certain charities, but also because we understood why we need to say “No” to others. We now have a carefully thought-out plan—and we’re sticking to it.

Step 5: Set your clients up with other like-minded clients. 

If Client A has college-aged children and lives in Wealth-ville, set him and his wife up with Client B who has college-aged children and lives in Wealth-ville. They have lots in common and lots to discuss—and may even become friends. This is a great value-add that will enhance your status as a family advisor, and focus your clients on issues such as transferring wealth (and wealth management resources) to their offspring.

Step 6: Move away from performance as the centerpiece of your business model. 

It’s a fact: when you give valuable guidance to the adult children of your clients—and act as an “extra” member of the family—your clients are going to care less about the performance of their portfolios. Sure, performance matters—and you have to measure up. But your clients will care far more about the wisdom of your advice on a wide range of personal/financial matters, as opposed to a straight-up numbers crunch. Besides which, when passing wealth from one generation to the next, aren’t we talking about preserving capital, as opposed to taking on the risks of maximizing performance?

Step 7: Charge the fees you deserve—you’re earning them. 

You’re helping to make your clients’ children happy and successful. Philosophically, you can’t put a price on that. But in the day-to-day world of wealth management, you can charge a fee for it. If your fees are reasonable, your clients will be more than willing to pay them. After all, these are their kids we’re talking about.

Step 8: Use technology as a tool that allows you to do what you do best.

When you offer great advice, you’re doing something that can’t be done online. There’s no automated way to “Wow!” your clients with incisive analysis and commentary. There’s no great software program that can build your reputation for personal integrity.

Rather, technology is a tool that frees you up for the unique, personal contributions you make to your clients’ lives. With ByAllAccounts’ software, for example, you have a data aggregation service that allows you to report on all your clients’ assets, including held-away accounts such as 401(k)s and 403(b)s. That gives you the efficiency, scalability and ultimately the freedom to focus on the big issues that matter most.

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