Inheritors rarely switched advisors. Only 4 percent reported making a switch after receiving their inheritance, while 3 percent said they added the advisor administering the inherited portfolio to their existing group of professionals.
The Impact
Most investors said receiving an inheritance had a low impact on their lifestyle. Overall, on a scale from 0 to 100, investors said the impact of the inheritance was just 18.14. Similarly, lower-net-worth individuals said the impact of the inheritance was also not very significant (25 percent), although the impact was higher than high-net-worth respondents.
The Emotional Connection
Spectrem qualitative data found that older and wealthier investors have a more emotional connection to their inherited assets. Most planned to save their inheritance to leave for younger generations, according to the report.
Financial advisors need to understand the importance of establishing relationships with the next generation and the emotional component attached to the transfer of wealth. Many older investors chose to save for future generations because they understood how hard elder family members worked to attain it. Farther removed inheritors often have a different connection to the assets and tend to spend more carelessly or pay down debt, said Randy Wostratzky, director of the Spectrem Group.
Spending Habits Of Inheritors
Inheritors who did not have a financial advisor were more likely to spend their inheritance, the study found. Developing relationships with the beneficiaries of existing clients can aid in preserving the wealth while creating an additional generation of client relationships.
Advisors need to have the proper conversations with the next of kin. Advisors can share what they can do for the overall financial plan of future inheritors -- debt management, help with home buying, etc. This includes help with managing the inheritance relative to their overall financial blueprint, said Wostratzky.