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Family affairs

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You have worked hard to build a solid roster of ideal clients, and perhaps you continue to do a good job of attracting new people that fit your ideal client profile. But are you neglecting the family? Not your immediate family, but the families of your clients.

If you can get connected and stay connected with the children and even the grandchildren of your best clients, you can keep a family’s business for life. If you have established relationships with subsequent generations, the assets don’t have to move on if a client happens to pass away.

Becoming a multi-generational advisor should be a top priority. In doing so, you provide a valuable service to your clients and their families by protecting assets and providing peace of mind. Still, many advisors have little or no connection with the children or grandchildren who will be inheriting their best clients’ assets.

Making those connections with the next generation is not always easy to do, and some attempts are sure to be met with resistance either by the current client, the children or grandchildren. But there are some effective ways to bring up the subject and begin building that relationship with subsequent generations of a family. And with the greatest wealth transfer in the history of the world upon us, now is the time to sharpen your focus on the next generation.

“The first action we take is to make the case with older generation that a connection with their children and grandchildren is a useful and productive activity,” says Michael T. Hartley, CFP, a principal of DKE Inc. and Tillman Hartley LLC, Venice, Fla.-based investment advisory firm specializing in estate and financial designs and family offices for ultra-high-net worth clients across the United States.

“We start by educating our clients about the three forms of capital that make up their family wealth: Financial Capital (their stocks, bonds, mutual funds, business interests and real estate); Social Capital (how the family relates to society through their philanthropy and contributions, volunteer service, and taxes); and Human Capital (the people in the family, their advisors and the family members’ knowledge, attitudes, skills, habits, wisdom, intellectual capital and governance systems),” Hartley says. “Once it is clear that the family’s greatest function is to create and support good, high functioning people over several generations, it is easy to have discussions around the topic of multi-generational contact.

Jeremy Rettick, a personal producer who is also vice president of marketing at Nashville, Tenn.-based Covenant Reliance Producers, says involving the children early on instead of after a death in the family allows an opportunity to handle any questions or objections far in advance. “And it allows for the advisor to start to build a relationship with a whole new set of clients,” Rettick says. “If we do a good job of taking care of mom and dad and it shows, the kids will be more than open to talking about their goals and how to achieve them. It is a natural progression.”

How to reach out

Here are some of the best ways to build your client base by essentially growing a “family tree” …

Charitable interests. Often intergenerational contacts begin with conversations around the family’s charitable interests, Hartley says. “These can begin even with elementary-aged children. We have designed a short conversation with young children that starts with a way to look at money in three pots: Money that is spent for their current uses; money that is saved for their future uses; and money that they use to help other people,” Hartley says. “We give each child a book about philanthropy written by a 14-year-old (“A Kid’s Guide to Giving”) and encourage them to read it with their parents. One family we advise asked each grandchild to suggest a favorite charity and make a short presentation about it to a family gathering. Each one made a presentation including why their recommended charity was important to them, and the family then made donations to each one. Some of them were delivered in person by the grandchild.”

Family meeting. “After the investment and estate plan has been agreed on, and in most cases implemented, we ask the client if he would be OK. with having a family meeting at our office,” Rettick says. “If they have children that live out of the state, it is a little more difficult, but we like to have at least one child in the meeting. We feel it is important for the other siblings to hear about the plan from someone other than the parents so that they feel the right things are happening for the right reasons.”

Annual review. Another good method of getting the family involved is to inquire about inviting your client’s children or grandchildren to the client’s annual review. Or at least ask about the client’s children and be on the lookout for life-changing events that may alter coverage needs.

“For clients with older kids, ask how their children are doing in their own financial situation and also how aware they are of your client’s financial situation,” says Dan Richards, president of Strategic Imperatives Ltd., a Toronto-based consultancy that delivers training to financial advisors.

Depending on the client’s response, Richards says you may have an opportunity to suggest either, a) sitting down with your client’s kids and helping them put a plan in place for their own finances, or b) offering to meet with your client and his kids to walk the kids through an overview of the parent’s finances. Richards notes that it’s always a good idea to review this with the client beforehand.

“For clients who are concerned, you can offer to help facilitate a discussion between parents and clients on their kids’ finances–and you can suggest that the client blame you for suggesting this,” Richards says. As Ron Lieber pointed out in a Nov. 8, 2008 article in the New York Times, grown children often don’t know how the devastation in the markets has affected their parents, and vice versa.

Client appreciation events. A great way to stay in front of your clients and get to know their families is by holding a small series of client appreciation events. While some advisors eschew these types of events due to privacy concerns, others are using them to great advantage.

One of the most successful client events that Richards recalls was when an advisor had a couple of experts come in to speak to clients, their parents and their children about transitioning to different housing alternatives as people got older. In a couple of cases, all three generations showed up.

For parents with kids ages 15 to 18, for example, Richards advises offering a Saturday morning session to talk about the fundamentals of investing. End it with pizza and you’ve got a hit on your hands. Another event Richards recalls that received a big family turnout related to strategies for dealing with tax liabilities when passing on a vacation home that has appreciated dramatically to family members. Finally, family-oriented outings such as a skating party, a private screening of a new release such as the latest “Harry Potter” flick, or even father-son golf or tennis events can all be effective ways to grow those family trees. You are also raising your visibility and profile, not just with top clients but also with their spouses and children.

Legacy planning.
Semantics may even play a role in getting a positive response to involving the family. While many clients are reluctant to discuss “estate planning,” they are frequently interested in talking about “legacy planning.”

The reason for this is that while estate planning is about transferring wealth in the most tax-efficient manner, legacy planning provides the opportunity to incorporate family values via tools such as an incentive trust.


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