Many advisors understand we’re on the edge of a giant wealth transfer. According to o Cerulli Associates, over the following 25 years, $60 trillion in assets were foreseen, to pass on to future generations.
Are you involving your client’s children?
Research conducted by Janus Henderson Investors, Financial Planning Association, and Investopedia concluded that Wealth managers are often not concerned about this aspect. Only 35% of advisors proactively bring up the issue with their clients. 71% of the surveyed investors, however, have never discussed it with their clients.
So, here are some of the top reasons why Financial advisors should involve the next generation:
It makes sense for wealth advisers to train the children of their clients to have basic financial knowledge. It will provide them with enough awareness about the portfolios, insurance, and assets that their parents are dealing with. The more you make them aware, the more they will visualize the dynamic and become more disciplined in managing future financial events. Furthermore, you will become your client’s kids’ trusted point of contact for any financial advice in the future.
The retention rate of assets increases:
As financial advisers, if you can form a bond with your client’s children and develop their financial know-how, then they are more likely to stick with you after the wealth transfer as well. For High-Net-Worth Clients, wealth management is, above all, the business that requires huge trust, and therefore, UHNW and HNW clients do not like to remove advisers who have been with them for decades.
Trust factor between you and your clients:
The Boston College Wealth Transfer Study concluded that between 2007 and 2061, $36 trillion worth of estates would be transferred to their heirs. When you involve your client’s children in the conversation from the get-go, you are more likely to understand their needs and temperament for the future. It will give you increased comfort with them, a distinct advantage that will help you retain businesses even in the long run.
How should you involve them in financial conversations?
As a wealth manager, you do not want to come across as boring to your clients’ children. Therefore, you have to keep the jargon to a minimum and focus more on listening. Remember, they are not the decision-makers now, so you have nothing to sell to them.
Here are a few subtle ways with which you can get kickstarted:
Hold periodic financial meetings with the entire family:
One of the easiest ways to approach this is to have quarterly, half-yearly, or annual financial meetings with the entire family. Wealth managers should never forget that while tending to their clients, they are expected to fulfill the expectations of the whole family’s financial goals, especially in the long run.
Getting the conversation started periodically and dominating it with fun metaphors and visually attractive representations can get children very interested early in their lives.
Find out the major concerns of the next generation:
If you are looking to handle your client’s successors’ finances, you should discuss their major concerns with them. Start with issues that particularly affect them – student loans, travel and leisure budgeting, tech budgeting, and more such areas. It will help you connect with them more seamlessly and hold interesting conversations.
Email them what you think they might find interesting:
Especially when you find children who are financially eager and conscientious, try sending them options of what they might find interesting. However, make sure you don’t spam them and keep communications to a minimum. Send them interactive polls, portfolio options, and surveys to find out how they want their financial lives planned out!
Do not be hesitant to ask for a personal meeting:
Once you have built rapport with your client’s children, do not hesitate to ask for a personal meeting. Financial advisors should involve the next generation especially if they seem interested in starting their financial journey. Always remember, your familiarity with their parents plays an advantage. However, please stay away from remarks that compare them to their parents or belittle their understanding.
Create a customized legacy success plan:
Clients who are unwilling to introduce their children to their financial advisers need to be approached differently. A 2003 research conducted by independent wealth consultants – Vic Preisser and Roy William concluded that around 70% and 90% of family wealth is lost by the end of the second and third generations, respectively.
This kind of performance strains family relations, and no matter how well your financial legacy transfer structure is, it will be incompetent in protecting the wealth unless heirs are well trained in finance. Allowing their children to start early will only ensure their prosperity in the years ahead.
Now that we have given you all the reasons and the know-how Financial advisors should involve the next generation, getting your client’s children involved, starting the conversations might be the best next step. Suppose you are looking to develop a succession plan for one of your affluent clients, partner with us at Continental Associate Network, and access the world’s most comprehensive insurance and legacy planning solutions. Book your free consultation today!