Over $30 trillion in wealth is poised to shift generations over the next few decades and, with the way it looks now, most advisors are going to miss the boat.

At LPL Financial’s Focus conference, Chris Hennessey, a lawyer, CPA, faculty director at Babson College School of executive education and member of the Putnam Business Advisory Group, offered advisors advice on how to retain the clients who will be the recipients of this massive inheritance.

The size and scope of the NextGen opportunity, or threat – depending how one looks at it—is immense. Baby boomers hold the majority of assets, but when those clients are gone, studies show their spouses and children tend to move on to other advisors. Hennessey stated that just 45 percent of assets are retained by advisors when the first spouse dies. Amazingly, only 2 to 10 percent of assets are retained when the children inherit the wealth. 

These are extremely scary or exciting statistics, depending on an advisor’s viewpoint.

Why Does The Wealth Leave?
Hennessey shared a case study of what happens. A mom loses her husband, who managed the financial affairs for the family. Because the mom had little interaction with the financial advisor, she asks for advice on what to do. Her eldest daughter did her own research and recommended alternative advisors. The mom took the daughter’s advice and the wealth went to another advisor.

Only 3 percent of clients said their advisor asked to meet their children, said Hennessey. So it makes sense in this case study that the eldest daughter would recommend someone else. No wonder advisors are not prepared to retain the assets. 

The lesson learned: Advisors should know the lead child as they have a lot of influence.

Hennessey said, “The advisor didn’t have a good enough relation with the wife, but he didn’t know the daughter.” He told attendees they should always be meeting with both the husband and the wife. They should also be preparing the heirs to receive the assets.

What Can Be Done To Capture The NextGen Assets?
Hennessey liked the idea of doing a family summit with children, parents and grandparents. He said a cut-off age 30 can be used, and it is important to supervise whether the meeting includes having relatives coming in from out of state.

Advisors need to get over the limited thinking of "No assets, why bother?" Family liquidity events can be sudden and unexpected.

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