According to various statistics, millennials and members of Generation X will inherit anywhere from $15 trillion to $40 trillion or more from their baby boomer parents by 2050. This will be the largest cross-generational transfer of wealth in history, but many financial advisors haven’t yet prepared for this opportunity.
Charles Schwab & Co.’s research findings indicate that approximately 60 percent of RIA clients are at least 56 years old, and control 69 percent of a typical firm’s assets under management. However, although most of their clients are older, just 16 percent of advisors are in routine contact with their clients’ children, and only 40 percent view the children of clients as an opportunity for their practices.
Fortunately, this situation can be easily reversed. Advisors can proactively demonstrate their value to existing clients by serving as a resource for their children—and digital technology solutions available today make it easier than ever before to do so.
Connect As Early As Possible
Advisors should ideally begin engaging with a client’s children at the very start of their relationship. Even during conversations in the prospect stage, advisors should make sure they explain, “Here’s what I can do for your kids.”
As the relationship progresses, advisors can proactively invite a client’s children to meetings, and reach out to them to offer financial planning education at applicable stages of their lives. This education can have a big impact if it is taught using the state-of-the-art reporting, proposal and prospecting tools that come with today’s digital advice platforms. For example, when a client mentions that their teenage son or daughter just secured their first after-school job, the advisor can offer to meet with them to deliver an interactive digital presentation on how to save and invest their earnings.
Then, as the high school student prepares for graduation and begins applying to colleges and universities, the advisor can reach out to discuss post-college earnings potential based on their intended major—again using an interactive digital presentation to make a connection and educate them about the importance of financial advice from a trusted advisor.
Adults often don’t talk with their children about money, and it shows. The TIAA Institute GFLEC Personal Finance (P-Fin) Index, a new personal finance index released this past March by TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC), found that 52 percent of U.S. adults surveyed could not answer more than half of the index’s financial literacy questions correctly. The index also reported that only 10 percent of adults under age 45 have a relatively high level of financial literacy. By working with clients’ children, whether they are adolescents or working adults, to help them meet their financial goals as well as improve their overall financial literacy, advisors can make those children financially self-sufficient—thereby decreasing their clients’ worry about providing for their adult children.
Bring Added Value To The Client Relationship
Advisors must cultivate relationships with their clients’ children in order to stay viable over the long term.