Advisors Miss Big Market Under Their Noses: Children Who Inherit Client's Estate

According to Cerulli, investors between the ages of 25 and 40 frequently encounter situations that would benefit from the input of a qualified financial professional. However, they often have no natural source for personalized recommendations because any assets they have accumulated are frequently contained within their employers’ retirement plans, whose servicers typically offer general guidance but not bespoke advice.

According to Scott Smith, director at Cerulli, the importance of reaching out to potential inheritors early and often is critical if an advisory practice hopes to maintain assets through a wealth transition.

“By expanding its network to encompass the next generation, the practice not only increases its retention opportunity at the point of wealth transfer, but also creates the potential for referrals from the heirs whose peers may have assets in transition as they move between jobs in their careers,” Smith said in a statement. “While each of these interactions may not lead to immediate asset flows, building a pipeline of affluent advice seekers is an excellent opportunity to secure future clients.”

According to Cerulli, advisors who work with investors’ heirs prior to a wealth transfer event are more likely to retain their assets.

“By waiting to work with clients’ children until after a wealth transfer event, advisors greatly diminish their likelihood of retaining the assets,” Smith said in a statement.

When respondents who received an inheritance were asked what they did with their funds upon receiving them, 20% of recipients indicate that they maintain a relationship with the same firm, while 36% moved the assets to be managed with the rest of their portfolio, and an additional 19% moved to a new advisor or to a robo-advisor platform.

— Related on ThinkAdvisor:

• How Will Millennials Invest Their New Wealth?
• Generational Wealth Transfer to Hit $68 Trillion Over 25 Years: Cerulli