Succession planning has been top of mind for June Schroeder, CFP, RN, and for good reason — in the foreseeable future, she will step down from the financial planning firm she cofounded some three decades ago. As she contemplates the move, Schroeder has a number of questions that need answering: Who will fill her shoes when she retires; and, what will become of the clients and the clients’ assets she worked so hard to cultivate over the years?
“We need to think about the people and families we’ve built trust with, and the security and sustainability that comes with their assets staying with our organization for planning and management,” explains Schroeder, who’s in the process of gradually stepping away from Liberty Financial Group, her Elm Grove, Wisconsin, firm. “When we first started, we never thought much about multigenerational planning and never made it a priority. Now we’re talking about it a lot more, and I expect it will be a big part of our strategic planning going forward.”
The strategic importance of cultivating multigenerational family clients isn’t lost on John Freiburger, CLU, ChFC, AEP, and the advisors at the firm he heads, Partners Wealth Management in Naperville, Illinois. “We realize,” he says, “that the value of a wealth management firm is only as good as the relationships and the assets that are there, and how long they are going to be there.”
Preserving relationships and holding onto assets when they pass among generations of a family is a high priority at PWM, whose client base includes a substantial percentage of multigenerational families, including a handful of four-generation family clients, according to Freiburger. “Why would we want that business and those relationships to walk out the door when they could continue with our clients’ children?”
As successful as PWM has been holding onto multigenerational relationships and assets, it appears to be an exception in the world of wealth management. According to a 2014 report from Fidelity Investments, an estimated 90 to 95 percent of heirs elect to find their own new advisor after inheriting money from their parents rather than sticking with their parents’ advisor.
The justifications for pursuing multigenerational family clients go well beyond the bottom line, according to Howard Erman, CFP, EA, president of Erman Retirement Advisory in Seal Beach, California, who says there’s much to gain from the sense of emotional fulfillment that often comes with advising multiple generations. “Knowing I’m making a difference for a family and the world brings with it a certain psychic satisfaction.”
“It’s gratifying,” echoes Freiburger, “to be able to help a family create a foundation for passing not just wealth but values from one generation to the next.”
“There’s a trust factor that comes with these relationships,” adds Schroeder, “where you feel like you become part of the family.”
Because this is family, advising multiple generations does present its unique challenges. There are deep-seated issues, unusual dynamics and oftentimes, plenty of baggage, be it emotional, financial or otherwise.
“The biggest challenge is that my degrees and designations have to do with wealth management and finance, not psychotherapy,” Freiburger says half-jokingly.
With large sums of money and frequently a family business involved, an advisor working with multiple family generations often must also wear the hats of psychologist, mediator, interpreter and peacemaker. As complex an undertaking as unwinding certain family issues can be for an advisor, there are situations where, according to Freiburger, it makes sense to “bring in an expert” — a psychologist or therapist — to move the planning process forward.
What’s more, it’s not always easy getting generations within a family to talk openly about their finances,
observes Schroeder. “Sometimes it’s difficult, especially for older clients, to share their financial information, as imperative as sharing that information is in many situations.”
If the client doesn’t see merit in opening such a dialogue with other family members, they may need a subtle nudge from their advisor, she notes. “It works better if it’s their decision [to bring other family members in to meet with an advisor]. But they can be led to that decision with a question like, ‘If something happens where you’re unable to make an important decision on your own, what would you want them to know, so they can handle that decision on your behalf?’”
Advisor as catalyst
Advisors who are skilled at initiating and moving those cross-generational financial dialogues forward tend to be most successful at cultivating multiple generations as clients, says Erman, who estimates his firm advises close to two dozen multi-generational families.
“What I try to do is to bring the children in with the client and have a family meeting; and to do that, you really need to first get the client’s permission and an idea of what they want to accomplish in bringing their kids in. The client has to want us involved, of course. And it usually works so much better if the parents are respected by the children.”
Freiburger takes a similar tact. “If we have our way, we’re going to [meet with clients’ children] every couple years.” These meetings provide a platform for him to review the parents’ wealth management plan, as well as his firm’s capabilities. “The more transparency and disclosure there is from us