How Advisors Can Tackle the Big Wealth Transfer

Financial advisors face a unique opportunity over the next few decades: $30 trillion in wealth will be transferred from Baby Boomer parents to their adult children over the next three decades. For advisors, this transition offers great opportunity to deepen relationships and expand business. It also presents a challenge that can have significant impact on the health of a firm. Heirs have ample opportunities for financial advice today. Advisors taking an active approach will be best prepared for the seismic shift.

Financial advisors are expected to focus on their clients; they’re the ones who hired you thus advisors are inclined to meet their clients’ stated goals. However, if too much focus is placed on meeting clients’ stated goals, the larger needs and opportunities for their families might be overlooked. Serving clients’ greater needs might seem unnecessary or like a violation of the boundaries of your role. Consider this – over 60% of adult children leave their parents’ financial advisor when they begin collecting inheritances. Even worse, only 17% of Millennials typically have a relationship with their parents’ financial advisor. (For more, see: Tips for Family Wealth Transfers.)

These are telling numbers. They reveal that adult children are typically not involved with the management of their parents’ investments and that it’s easy for them to take their investments elsewhere upon distribution of inheritance funds. How can you change this as a financial planner? It’s quite simple really – by getting to know your clients’ families.

By broadening the client relationship to the family level, you learn how to serve clients’ greater needs. You can discover many of these needs through regular family meetings involving the adult children of clients. These meetings can not only forge a relationship with the children, but it can also help them see you're working in the best interest of their parents. Use these meetings to see how you might be able to help the family as a whole, by exploring things like: (For more, see: Estate Planning Tips for Financial Advisors.)

• 529 accounts for grandchildren
• Retirement planning assistance for adult children
• Asset management upon passing of parents

The benefit of having regular family meetings is two-fold. First, it allows you as an advisor to protect your firm from loss as you set yourself up as the family advisor, not just the parents’ advisor. Secondly, it helps clients assess their larger needs. (For more, see: Top Tips for Helping Clients Leave an Inheritance.)

The upcoming wealth transfer reveals a hard reality – families will face difficult decisions about how to best care for aging parents. Unfortunately, this is a topic many families fail to discuss at length. A recent Fidelity Investments study reveals nearly 40% of aging parents have not had significant discussions with their adult children regarding their finances. The same Fidelity study also reveals that parents and adult children are more comfortable speaking with advisors about their needs than they are together.

This provides a chance for you as an advisor to make a positive difference in peoples’ lives. Not only can it help your firm from potentially losing assets upon passing of your clients, but it can also help from the standpoint of bringing in newer, younger clients to your firm when adult children choose to have you manage their assets instead of another advisor. (For more, see: Now is the Time to Snag Gen X Clients.)

More than opportunity, these numbers point out a responsibility to you as an advisor. There are many things to consider as a parent begins to think through retirement, life after retirement and end-of-life needs when it comes to assets. It’s your responsibility as a financial advisor, so far as you’re able, to help clients plan for those needs. By involving their adult children you not only set them up for success as a family, but you also present yourself and your firm as a partner to help them through tough times and the passing down of wealth for future generations of family members.

Managing investments for a client comes down to a trusting relationship. Money is a very personal matter, and clients trust you to help them meet their goals. It's no surprise to hear that two-thirds of adult children move funds away from their parents’ financial advisor upon inheritance. In many instances, they do so because they simply have no relationship with you or your firm. (For more, see: Financial Advisors Need to Seek Out This Group NOW.)

It’s up to you to change that. In a climate where there are many options to choose from it behooves you to build that relationship with the family of the client. This might be a challenge but look for ways to involve your clients’ children. Ask to have regular meetings, based on the needs of the client. Seek to offer a holistic approach to your clients and their families. Not doing so can leave heirs looking for more and increase the likelihood of them leaving your firm.

We are at a precipice in society. The impending wealth transfer presents a significant challenge for families. There are many things they must consider to protect the assets of their parents. Take advantage of this situation by positioning yourself as the financial advisor of choice for your clients’ children. (For more, see: Growth Strategies for Financial Advisors.)