NextGen 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. NextGen 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 leverage estate planning. The impending transfer of wealth from one generation to the next highlights the need for planning to help ensure assets are passed and received efficiently. Financial advisors can use this opportunity to expand their engagement with clients and their heirs—by including children and grandchildren—to strengthen relationships and retain that next generation of clients.
Closing The Estate Planning Gap
According to research from Fidelity, advisors have reached out to just 13% of clients’ children. This presents a huge opportunity for the future. 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 to households without family engagement.
Research on NextGen investors identifies significant differences from older generations of clients that advisors can use to realign their offering. 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 is uniquely their own.
Leaning into estate planning with clients and their children and grandchildren means advisors should consider ways to understand these preferences and consider how their offering addresses them. Here are a few of those ideas:
1. Assess the existing estate planning capabilities of your practice. Do you have the right team members and technology in place to offer valuable estate planning services that will connect with those clients? Given that they have some shared and some generation-specific concerns such as taking care of family members and having enough time and money, do you offer the capabilities to address their needs today? Estate planning software might be an efficient way to help cover those bases.
Top Concerns Among Generational Clients
2. 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 the NextGen clients? Do you have access to the technology they prefer, and can you deliver the communication style they are looking for?
Generally, Younger Clients Prefer More Touchpoints
Response indicates how often clients want to meet with their advisor to discuss their portfolio in the next 12 months
3. Speak directly to those 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?
Younger Clients Have A Different Vision For Their Future
Response indicates which goals were noted as “very important”
4. Put it into perspective. One firm we heard from uses an estate planning software to offer comprehensive services that are scalable and deliver highly visual reporting that is easy for clients to understand.
“At my firm, we utilize estate planning software, FP Alpha, to scale this service. It not only saves time but also assists us in delivering more comprehensive advice to clients. We have found that using software like this allows us to engage more often with both current clients and their heirs. The software produces an appealing and easy to follow visual deliverable that significantly helps in getting the discussion started with clients about estate planning and involving their heirs in a follow up meeting.”
The resulting visual output can help give perspective for both clients and their loved ones about how the 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 NextGen investors, will be a key capability for future retention and growth.
Keven DuComb is senior financial planning and estate specialist at Altfest Personal Wealth Management.