Shes Young And Potentially Rich. Is She A Prospect?

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Young American women could inherit hundreds of billions of dollars in the coming decades, and those women are forming their impressions about financial services advisors and companies today.

Is there any way for wealth advisors and the companies they represent to follow the example of the mass marketers and reach young women of means now, before bad decisions about trusts, insurance, retirement planning and other financial matters give them more than their fair share of gray hair?

Financial services experts interviewed for this article say the savviest wealth advisors already are trying to build relationships with the daughters and granddaughters of existing clients.

Breaking through existing rings of advisors is much tougher, but the experts interviewed say go-getters can increase their chances of success by knowing their stuff, getting close to potential prospects and understanding that managing wealth is about more than money.

“Women feel theyre supposed to keep their emotions and money separate,” says Alexandra Lebenthal, president of Lebenthal & Company, New York, a unit of Advest Inc., Hartford, that sells municipal bonds to individual investors. “This is about peoples feelings and family.”

Lebenthal knows about the subject from firsthand experience: Lebenthal & Company was founded by her grandparents, Louis and Sayra Lebenthal, and she began working for the firm when she was 4, by putting reinforcers on client records that would be stored in 3-ring binders.

Barbara Stanny, the author of “Prince Charming Isnt Coming: How Women Get Smart About Money,” is living proof that many young women from affluent families may need more advice than their loved ones realize.

Stanny, who now runs personal finance education programs for financial services companies and their clients, is the daughter of the late Richard Bloch, the “R” in H&R Block Inc., Kansas City, Mo. Bloch managed his daughters money, and he told her not to worry about money because her husband would manage it. Then she married a man who gambled much of her money away. “I got tax bills for over $1 million,” Stanny says. “Thats when I knew I had to get smart.”

Affluent families may be more likely today to educate their daughters about money, but many young women are almost as confused as women in previous generations were, Stanny says.

Sizing up the young female wealth market is difficult because conducting surveys of young women and girls from affluent families is difficult, but researchers hired by a unit of Allstate Corp., Northbrook, Ill., found that 16% of young, “Generation X” women, or about 4 million U.S. women born between 1965 and 1978, expect to inherit more than $100,000. If those GenX women are correct, they could inherit more than $450 billion. Women born after 1978 could inherit at least $900 billion.

That estimate could be far lower than the actual total: More than 338,000 U.S. households had a net worth of at least $10 million in 2001, according to a 2004 draft paper by Edward Wolff, a New York University economist.

Many “trust fund babies” already have access to some trust income.

So far, young women who have inherited or might inherit large sums of money have gotten little attention from financial services marketers. Their mothers and grandmothers still have large, unmet planning needs, and the typical advisor may not know many wealthy young women.

At most practices, the typical young female client is a successful professional in her 30s or a woman who has received a substantial divorce settlement, according to Susan Stewart, president of Charter Financial Group Inc., Washington.

In addition, its hard to know how much wealth families really will transfer, says Deena Katz, a baby boomer who is president of Evensky & Katz Wealth Management, Coral Gables, Fla.

“Our parents had a lot more money,” Katz says. “Were going to have less money to pass to the next generation.” Many boomers who could afford to leave more than $10 million to their daughters would rather give a higher percentage of their assets to charity, Katz says.

But Stephen Rothschild, president of Rothschild & Sale, St. Louis, and first vice president of the Million Dollar Round Table, Park Ridge, Ill., says most of his wealthy clients would like to leave at least $5 million to each of their children, and a survey report from the Spectrem Group, Chicago, shows that heads of about 75% of U.S. households with at least $1 million in investable assets want to transfer most of their assets to their children.

Are young affluent women different from comparable men?

Although each individual is unique, Spectrem research confirms that women still tend to feel more confused about their finances, are more conservative about investments and depend more heavily on advisors than comparable men. Younger women and girls also face concerns about what might happen if they marry men who are dishonest or bad with money, experts say.

In the real world, most of the firms marketing to young women already advise their families. In the wealth planning market, “its important to view the whole family as an opportunity,” says Stacy Braun, senior vice president of marketing at AXA Financial Inc., New York.

“We borrow the prestige of having done business with the parents,” says Rothschild, the St. Louis advisor.

Some firms invite older female clients to bring daughters or granddaughters to attend seminars led by speakers such as Barbara Stanny.

Lebenthal remembers one seminar, featuring a presentation by an anthropologist that had nothing directly to do with financial services but put mothers and daughters in a great mood to talk to the financial advisors in attendance.

Several advisors say their firms try to build multigenerational bonds and clear up misunderstandings by organizing regular meetings for clients families.

For advisors who want to make direct connections with the young women themselves, one strategy might involve advertising in local publications that appeal to affluent young women and allying themselves with companies that do a good job of marketing to consumers of all ages at all income levels.

Jen LaFrance, for example, is an advisor at Baystate Financial Services L.L.C., Boston, an affiliate of MetLife Inc., New York. MetLife has been using Snoopy to help it promote its brand for years. Thanks to the advertising, “the average person who doesnt know about life insurance knows MetLife,” LaFrance says.

To break into the young affluent female market, advisors also will have to use far more targeted strategies, such as making financial services presentations at high schools and colleges that enroll large numbers of affluent young women.

Katz says advisors interested in the market should attend the charity parties that attract wealthy young women in their communities. “You want to join groups where people can talk about you when youre not there,” Katz says.

Because, in the end, advisors tend to get most wealth management clients through referrals from other advisors; advisors also have to make sure they appeal to other advisors.

Constance Fontaine, the holder of the Larry R. Pike chair in insurance and investments at The American College, is an example of the kind of expert who often gets asked for referrals.

When Fontaine makes a referral, she thinks about factors such as the advisors college degrees, professional designations and enthusiasm for continuing education courses. But, what an advisor needs most is current knowledge about wealth planning and a strong willingness to serve, Fontaine says.

What can advisors offer young women of means?

To some extent, the kind of advice advisors offer will depend on whether young women are getting expected or unexpected transfers of wealth.

In most cases, wealthy young women have known their parents advisors for years, says Marcia Murray, a senior private client advisor in the Atlanta office of Wilmington Trust Corp.

“Theyre used to and comfortable with the complexity that wealth brings,” Murray says.

Young women who are getting surprise bequests may face more urgent and more complicated planning problems.

In general, though, experts interviewed recommend that advisors offer the following:

Encouragement, even for women who have not yet inherited money, to ask questions and educate themselves. Even though young women may inherit flocks of advisors with their money, they “have to know that they dont have to keep those professionals,” Stanny says.

Explanations of how much money the young women might really need. Americans born between 1967 and 1981, for example, might need up to $10 million to retire at 60 on a lifetime annual income of $100,000, according to New York Life Investment Management L.L.C., Parsippany, N.Y.

Preparation for relationships that may not work out. Rothschild points out that young women from affluent families that set up the right kinds of trusts never need to worry about negotiating prenuptial agreements.

Advice about the importance of disability insurance and long term care insurance. “Even at a young age, that should be mentioned,” Fontaine says. Occasionally, prefunded insurance plans could survive economic upheavals that attack a young womens other assets.

Advice about socially conscious investment strategies. Murray says many wealthy young women she meets are interested in using part of their wealth to do good.

Guidance on ways to use smaller inheritances as seeds to grow more wealth. Fontaine likes to tell the story of a bookkeeper who turned a small sum into a much larger sum by using an inheritance to earn the Certified Public Accountant designation.

Referrals to experts on immigration and international tax law for young women who might be marrying young men from overseas. In some cases, international marriages can create complicated tax-planning problems.


Reproduced from National Underwriter Edition, February 18, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.