Next-generation investors are about to receive a significant portion of “the great wealth transfer” over the next 20 years. And those who don’t have a relationship with their parents’ financial advisor and some solid planning already in place will likely be looking for someone new to help them manage those assets.
Opinions vary on the details of the impending wealth transfer, but the fact is that baby boomers are set to pass an unprecedented amount of accumulated wealth—estimates go as high as $90 trillion—over the next 20 years to their heirs. Some say this transfer is already underway, which means the time is now for advisors to think about how they are positioning their practice to retain the wealth that’s being transferred.
Establishing Generational Relationships
While the children and grandchildren of older clients may not fit the ideal client profile yet, and advisors may not be focused on working with them today, they should be. Next-gen investors already need and want financial advice, and as they look to establish a relationship with an advisor, they will undoubtedly find one—and stick with one—who is attuned to their needs.
One easy way to establish relationships with the children of clients is to help them with estate planning, since it will be required to ensure clients’ assets are passed on and received efficiently. By including children and grandchildren in discussions, financial advisors can better engage with their clients, strengthening relationships and retaining that next generation.
Closing The Estate Planning Gap
According to research from Fidelity, advisors have reached out to just 13% of clients’ children. Advisors can look at this gap as a huge opportunity to reach out to clients. The same research shows that households in which the next generation is engaged generate 160% of the revenues and 270% of the profits when compared with households that don’t have any family engagement.
Research on next-generation investors suggests they are different from their elders and their needs are unique—in everything from their financial priorities and values to the way they want to interact with a financial advisor to how they find and share information.
By leaning into estate planning with clients and their children and grandchildren, advisors can come to understand these preferences and consider how to align their offerings accordingly. Here are a few ideas about the ways advisors can do this:
1. They can assess the existing estate planning capabilities of their practices. Ask yourself if you have the right team members and technology in place to offer valuable estate planning services that will help you connect with next-gen clients. Given that they have specific concerns—about their ability to take care of family members, for instance, or about having enough time and money—do you offer the things that can address their needs today? Estate planning software might be an efficient way to help cover those bases. (See Exhibit 1.)
2. Advisors should identify and understand an ideal client for estate planning. Considering your existing client base, who does it make sense to propose estate planning services for? What are the preferences and motivators of next-gen clients? Do you have access to the technology they prefer, and can you deliver the communication style they are looking for? (See Exhibit 2.)
3. Advisors should speak directly to next-gen investors. Considering how clients might find you and what you’re saying about your offering, are you talking about what is really important to them? Have you created messaging that resonates and connects with their priorities for the future? Once they do engage with you, how will you continue to support them along the way? (See Exhibit 3.)
4. Advisors should be able to put things into perspective for clients. Advisors could use planning software, such as that offered by our affiliate firm, FP Alpha, that could offer visual reporting that is easy for clients to understand. Such visuals can give clients and their loved ones perspective about how a plan will unfold and what responsibilities everyone has. This can give them time to understand and prepare for the future state of their wealth.
The great wealth transfer may already have started, which means advisors should be thinking about how they will retain their older clients and engage with the next generation of clients. Estate planning, with a focus on aligning to the needs and preferences of next-gen investors, will be a key capability for your future client retention and growth.
Keven DuComb is senior financial planning and estate specialist at Altfest Personal Wealth Management.