The Great Wealth Transfer is just on the horizon, marking the shift of up to $90 trillion from one generation to the next. For financial advisors, this means being prepared to help one generation plan to leave a legacy, while helping another navigate a potential windfall.
While not every client scenario is going to involve a large financial gift, advisors still need to proactively address this reality with their clients to ensure a seamless transition of assets. The are three high-level steps advisors should take to create a plan, connect with the next generation and continue to guide families in their financial journey.
Step #1: Help Aging Clients Determine Their Legacy Objectives
For advisors, navigating the Great Wealth Transfer starts by initiating discussions about clients’ unique retirement aspirations and legacy goals. These conversations should be comprehensive and personalized, covering all aspects of a client’s financial circumstances. By doing so, you help clients start to answer difficult but necessary questions. How do they want their wealth to impact their loved ones and chosen causes after they’re gone, and how does this impact their other goals, like their retirement lifestyle?
One invaluable resource for this is interactive scenario modeling. This enables clients to visualize different financial scenarios based on their objectives. Whether your client wishes to fund their grandchildren's education, support charitable organizations, or ensure the intentional passing of their wealth, scenario modeling provides clarity and confidence in their plans.
By collaboratively walking clients through potential courses of action and tradeoff decisions, you demonstrate the impact of their financial decisions within the context of their broader objectives. Not only is this a powerful way to help clients zero in on their desired legacy plan, but it gives them a true sense of ownership knowing they helped create their plan.
Advisors who plan collaboratively in this way pave the path for a smooth and intentional transition of wealth, ensuring their clients’ legacies are preserved and cherished.
Step #2: Conduct Joint Meetings With Clients And Heirs
One of the most critical next steps in navigating the Great Wealth Transfer is conducting joint meetings with your clients and their heirs, particularly for high net worth and ultra-high net worth families. These meetings are essential for several reasons: they ensure a solid legacy plan, they help educate heirs and they can be beneficial in retaining assets under your management.
Engaging both clients and heirs in these discussions helps to clarify and solidify the legacy plan, ensuring the client's wishes are accurately understood and respected by the next generation. These collaborative meetings foster transparent communication and bolster family cohesion over wealth management decisions. By addressing questions and concerns in a face-to-face setting, you can help mitigate misunderstandings and potential disputes down the line.
To facilitate a thorough understanding, it's beneficial to use visual estate plan flowcharts within these meetings. These flowcharts are invaluable in breaking down complex estate planning concepts into digestible, visual representations. Whether outlining asset distribution or trust structures, visual aids make otherwise intricate information more comprehensible.
Financial decisions aren't just about numbers—they're about people, legacies and futures. By making legacy plans digestible, you’re humanizing your advice, helping the whole family understand the real-life impact of the plan. This will help your advice resonate more deeply, fostering family trust and a shared commitment to the agreed-upon financial strategies.
Step #3: Conduct Individual Meetings With The Next Generation
The last, yet equally critical step in navigating the Great Wealth Transfer is holding individual meetings with the next generation. This approach is pertinent not only for high-net-worth clients but also for those who fall under the mass affluent category. These personalized meetings are pivotal in building meaningful relationships with individuals who, if not already your clients, are potential clients. They are also valuable for demonstrating how an inheritance may impact these individuals’ financial goals.
Even if you’ve already met next generation clients in a family setting, a one-on-one meeting provides a private and secure environment where they can ask questions and express concerns. This helps you understand the unique financial perspectives and goals of each potential new client—an essential step in showing them how an influx of money will impact their lives.
To effectively support these clients through this transition, advisors must have full spectrum planning capabilities. Advisors need the ability to handle complex financial structures suited to wealthy clients, while also being nimble enough to address more straightforward, evolving needs of next generation clients. Demands at various stages of life and different wealth levels vary greatly, and the advisor’s toolkit must be versatile enough to cater to these diverse requirements.
Furthermore, planning software with interactive scenario modeling, a suite of easily digestible reports and tools for continual client collaboration will help establish an open and honest relationship with the next generation. These features will be invaluable in helping demystify the wealth transfer process while helping clients make wise use of the inheritance they’ll receive.
Navigating Both Sides Of The Great Wealth Transfer
As the Great Wealth Transfer unfolds, financial advisors will be tasked with facilitating a smooth transition of wealth between generations. This presents a great opportunity to bolster existing relationships, build new ones and continue to manage family wealth for many years to come.
Interactive scenario modeling, advanced estate planning techniques, easily digestible planning data and full spectrum planning capabilities will all be essential in helping both sides of this landmark financial event navigate the transfer of wealth.
Joshua Belfiore is manager of group product management at eMoney Advisor.