Almost all adult children select a new advisor once they receive an inheritance from their parents, says Fidelity Investments. To keep those assets and continue working with a client's heirs, the investment firm suggests advisors incorporate multigenerational planning into their practices.
The first step to this process, says Larry Sinsimer, senior vice president of practice management for Fidelity Financial Advisor Solutions, is for advisors to get the wealth transfer conversation started.
Parents and children are emotionally reluctant to discuss family financial issues, according to Fidelity’s Intra-Family Generational Study, released today. Parents want to wait until after they are retired and have their estate plans in place. Children want to have the conversation earlier because they are unaware of their parents' ability to live comfortably in retirement or if they have enough money for health- and elder-care costs.
“To get the parents and children in a non-emotional setting, the advisor has the opportunity to fill a very important role of counselor,” said Sinsimer. This allows the family to discuss finances with a third party helping along the way.
“Here is a great way for advisors to change the way they are viewed by the children of their clients; you are no longer mom and dad’s broker, you are now the family advisor,” he said.
The study found that 40 percent of parents indicated they have not had detailed conversations with children about covering living expenses in retirement. An additional 15 percent have not had any conversations at all.
Forty-three percent of parents indicate they have not had detailed conversations with children about healthcare and eldercare expenses, and an additional 20 percent have not had any conversations at all.
And, although parents are more likely to have discussed wills and estate planning with their children, even in this area, the study found that 31 percent have failed to have very detailed conversations and 10 percent have not had any conversations at all.
To integrate generational wealth transfer strategies into your practice, Fidelity suggests advisors speak to their clients about involving their adult children in their financial planning discussions and that they participate in periodic meetings.
Parents could create starter accounts that each child or heir manages with his or her own advisor, potentially a younger advisor at the firm.