Advisors know that tens of trillions of dollars in accumulated wealth are soon to change hands.
But embedded within the “great wealth transfer” is more opportunity than some perhaps realize.
As older Americans, particularly baby boomers—by one estimate the richest generation in U.S. history—leave their wealth to heirs, one pervasive industry narrative maintains that those new heirs will inevitably dismiss the incumbent family advisor and look elsewhere for guidance on their new wealth.
But it’s not necessarily so. In new research, we found that new heirs are often eager to continue working with a family financial advisor—if they already know and trust the advisor. The fact is that advisors in a family advice role who have established valued relationships with prospective heirs before family money is passed down have a great chance to keep that role with the next generation.
There’s a strong economic case for looking to that next generation, too. Advisors with younger books are growing at a faster rate than those with older books, according to McKinsey research (State of North American retail wealth management, 2019); however, less than 25% of advisors’ current clients are under 50, notes Cerulli (U.S. Advisor Metrics 2021). Engaging future “wealth inheritors” can help remedy that imbalance.
Who Are The ‘Wealth Inheritors?’
We interviewed 376 “wealth inheritors” and, for comparison, 143 “wealth builders.” All have a current or projected net worth of $1 million or more, and all have a current or a previous financial advisor relationship or would consider one. Ten percent or more of the inheritors’ net worth is from or projected to be from an inheritance; builders do not have or anticipate such an inheritance.
Bottom line, future wealth inheritors want an advisor: nearly nine in 10 plan to have one when they receive their expected wealth. And an incumbent advisor can have an edge: 64% of current heirs who were introduced to the family’s advisor went on to work with that advisor, instead of seeking out an alternative advice source. What’s more, 80% who first met the family advisor quite early on—as a child or a teen—ultimately decided to work with the advisor, vs. 54% of those who met the advisor as an adult or young adult.
The Financial Goals And Preferred Advice Models Of Wealth Inheritors
Wealth inheritors are focused on putting their money to work across multiple competing goals, both personal as well as family- and community-oriented, our research shows. Nearly nine of 10 assign top importance to having enough to support their retirement lifestyle and achieving financial stability and independence. But nearly six of 10 also want to pass wealth to future generations and fund the education of children or grandchildren; half want to give to charity or fund a financial legacy.
Inheritors are actively seeking financial advice across multiple sources. Though advisors are the top choice for advice and education (65%), many inheritors also rely on family or friends (60%) or online research or trading sources (53%)—though just 19% use robo-advice. And 54% of inheritors (vs. 35% of wealth builders) are working with more than one advisor.
Yet, most inheritors won’t fully outsource their wealth management to an advisor: nearly seven in 10 working with an advisor prefer to personally oversee some aspects of their financial plan.
Through this research, we found an investor cohort seeking holistic, well-rounded relationships with advisors who are true partners and help maintain focus on what matters most. Such investors also seem likely to favor advisors who position themselves as advice orchestrators, overseeing the client’s overall wealth and planning, and coordinating the efforts of other specialists.
The Six Non-Negotiables
Taking advantage of the wealth inheritor opportunity does call for some intention and action. Our research suggests several key steps for advisors:
1. Start early: Lay a foundation of trust with future inheritors by providing education and initiating discussion—as early as possible—on topics appropriate to their age and life stage.
2. Focus on strategy: Consider how to offer clients and their families a comprehensive, inclusive experience through a wealth transfer strategy, vs. merely presenting them with a wealth plan (strategic advice can facilitate connecting with purpose to additional family members).
3. Facilitate involvement: Consider offering a flexible fee structure and a client-engagement model allowing for varying degrees of investor involvement.
4. Link assets to goals: Discuss incorporating varied investment asset classes and vehicles into the portfolio, while also connecting goals with investment interests and explaining how that translates into portfolio construction.
5. Have the right team: Maintain a multigenerational, diverse service team.
6. Foster high performance: Align your service model and team strengths to support the needs of current clients and future generations of wealth owners.
By understanding what wealth inheritors want and deploying a multigenerational approach, advisors can fully participate in an unprecedented shift in wealth ownership. Indeed, multiple opportunities exist—even years before the fact—to well serve the interests of wealth inheritors in ways that make for satisfying, enduring relationships.
Joy Crenshaw, CIMA, is head of advisor development at Nuveen, the global asset manager of TIAA. In her role, Crenshaw is responsible for the knowledge and skill development for Nuveen’s client facing distribution teams across the globe and oversees the strategic direction for the advisor education team responsible for thought leadership and value-add programs for financial professionals and home offices.