Are You Ready for the Great Wealth Transfer?


It’s estimated that Baby Boomers will transfer about $68 trillion in assets to Generation X and Millennials over the next 25 years – the largest generational wealth transfer in history. This is both an opportunity and a risk for financial advisors.

It’s an opportunity for advisors to grow their book and maintain their current one by advising the heirs of their current clients. It’s also a risk because statistics show that more than two-thirds of heirs fire their parents’ financial advisor after they inherit their parents’ wealth.

Financial advisors who have a plan to draw in the children of their best clients and become a trusted family advisor will be best positioned to retain client assets across generations while also greatly strengthening current client relationships. Here are some strategies to consider as you look to build connections with your clients’ heirs.

Start Early

Even if your clients’ children are young or in their teens, there are ways to engage them early on. After all, it takes years to develop a strong relationship. You can start during the financial planning process by asking your clients about their children. Take the time to learn about their hobbies and interests. Will they be celebrating a major milestone in the coming year? You can show genuine interest in your clients’ children by remembering important dates or sending them a small gift that aligns with something they enjoy.

Some financial advisors also host investing 101 or stock and bond tutorials for teens or adult children in their early 20s. Other advisors assist their clients’ children with things like making 401(k) plan choices, offering portfolio and stock option advice, or securing a mortgage. The idea is for your clients’ children to get to know you long before they receive their inheritance.

But It’s Also Better to Start Late Than Never

Some of your clients may have children who are part of Generation X who are in theirs 40s and 50s. It’s not too late to get to know these heirs and, in some ways, it can be an opportune time to do so. Many of your clients’ heirs are facing tough issues as their parents age, so it’s a good time to bring them into the conversation.

It can be as simple as asking your client, “Who can I contact if you suffer a significant health issue or other serious problem in the future?” This can open up a conversation with your client about getting their adult children more involved in their finances. You can help facilitate a family meeting or invite adult children to sit in on portfolio reviews. You can also offer to review their portfolio – even if they already have an advisor – to help them prepare for when they will inherit their parents’ wealth.

Train Heirs to be Better Stewards of Their Parents’ Wealth

Statistics show that 70% of family money disappears by the end of the second generation. Ninety percent is gone by the third generation. Getting in front of clients’ children or grandchildren early can help educate them about how they can use their inheritance to build greater financial security for themselves and their children. It can also help them better understand the clients’ intent for their wealth, including the legacy they may want to leave through charitable giving. Ultimately, bringing up wealth transfer to your clients shows you care about the future success of their children.

Integrate the Latest Technology into Your Practice

If you want to attract and work with younger clients, you need to meet them where they are. Generation X and Millennials expect to be able to view their account information and complete certain transactions online. They also like to research and explore different planning issues in their lives before reaching out to an advisor for advice. Is your practice positioned to serve a younger client base? Research shows that advisors who are quicker to adopt new technologies into their practice can grow more quickly and are able to deliver a better experience for their clients.

Invest in the Future Value of Your Business

What would you do if you lost two-thirds of your clients over the next several years? How would you replace those assets? Wouldn’t it be easier if you could retain these assets, rather than having to find new clients?

If you want to build a sustainable business that you can eventually sell, it’s important to build relationships with your clients’ heirs. A firm’s valuation will be higher if you can show that you have relationships with your clients’ children and grandchildren. It will also be higher if you can show a track record of retaining assets after a client dies. Advisors who can demonstrate that they have a plan to retain assets with the next generation are better positioned to get more value out of their business.

Create a Path for Clients to Follow

Trying to develop a relationship with your clients’ children after they have a serious health crisis or pass away is too late. If you fail to engage with your clients’ heirs early in the relationship, you are missing out on a big opportunity to retain millions in assets for your practice. You will also lose the chance to develop even stronger relationships with your current clients.

If you give your clients a pathway to involve their children, they will take it. And taking the time to develop deeper relationships with your clients will go far in gaining the trust and loyalty of succeeding generations.

The paper/commentary was prepared by Momentum Independent Network (MIN). It is intended for informational purposes only and does not constitute legal or investment advice. The statements within constitute the views of MIN as of the date of the document and may differ from the views of other divisions/departments of affiliate Hilltop Securities Inc. In addition, the views are subject to change without notice.

Momentum Independent Network Inc. is a registered broker-dealer and registered investment adviser that does not provide tax or legal advice. MIN and HilltopSecurities are wholly owned subsidiaries of Hilltop Holdings, Inc. (NYSE: HTH) located at 717 N. Harwood St., Suite 3400, Dallas, TX 75201 (214) 859-1800, 833-4HILLTOP. Member FINRA/SIPC

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