As $30 trillion makes its way from baby boomers to the next generations over the coming decades, many advisory firms risk seeing their managed assets slip from their grasp as clients’ beneficiaries take their money elsewhere.
Here are the facts: 66% of children fire their parents’ financial advisors after receiving an inheritance. On average, only 50% of the wealthy intend to introduce their family to their advisor. Only 20% of advisors are targeting family members of clients. The top reason advisors can’t retain clients’ assets passed to heirs is lack of a relationship.
Even advisors who believe their personal and professional relationships with clients couldn’t be stronger are likely leaving relationships untapped and assets on the table. They’re relying on clients to form relationships with beneficiaries on their behalf, but this generation is savvy and they won’t stick with their parents’ advisors just for intergenerational loyalty. Advisors need to form their own connections, and most are failing to seize the opportunity to develop a solid relationship with their clients’ beneficiaries.
Are You Ready for the Great Wealth Transfer?
Given the enormous quantity of assets at stake in this impending transfer, no amount of preparation is unwarranted. Fortunately, solutions requiring very little time and effort exist. You don’t need to offer perks or host events to cultivate extended networks. Nor must you set up quarterly meetings with every family member. Rather, simple, sustained communication and relationship-building with the next generation of clients is all that is needed.
A 2013 Vanguard study found that you’re more likely to retain assets under management when you get to know your clients’ beneficiaries before a major event occurs. More often than not, recipients of an inheritance leave assets with their benefactor’s advisor for about a year. In that time, if no counsel is offered and no meaningful relationship is established, the inheritors take their assets to the first wealth advisor who fills this need. The writers of the study recommend beginning relationships now so that you’re already a trusted figure through difficult times.
Using Digital Communications to Connect With Clients’ Beneficiaries
Younger investors are looking for more direction and have questions about the future, but many rely on robo-advisors or their own research and methods instead. Of primary concern is the responsibility they feel for the well-being of their aging parents. This is an excellent opportunity to spark a lasting relationship with your clients’ children. Involve them in life planning discussions to alleviate uncertainties and establish yourself as a knowledgeable, trusted figure.
Additionally, advisors are hesitant to engage a generation that prefers digital relationships to the traditional methods of interaction preferred by their parents. Advisors who have spent years relying on in-person meetings and phone calls don’t know how best to bridge the communication gap with millennials and Gen Xers. However, the solution is quite simple: Place your expertise and services in front of them where they are – email and social media – and do so consistently.
A simple email is all it takes. In your next client newsletter, focus on topics relevant to clients and their children like estate planning, elder care, and wealth transfer. Encourage your clients to forward the email to their children or other beneficiaries. You’ve just begun a digital relationship with your clients’ beneficiaries; you’ve engaged them on the channels they prefer, you’ve offered value in the form of educational content, and your name has been referred by a parent they trust.