Baby boomers may be set to pass along $41 trillion to their Generation X and millennial heirs over the next 30 years, but that doesn’t mean most financial advisors are ready for the greatest wealth transfer in history.
A mini-cottage industry of consultants is springing up to address this transfer. One of them, Richard Orlando, founder of Legacy Capitals, has built a consulting firm that specializes in teaching advisors how to engage clients’ heirs in whole-family financial planning discussions. The firm conducts workshops for advisors showing them how to engage and do financial planning with clients’ spouses and heirs so they don’t lose their business.
The stakes are extraordinarily high for the investment advisor business. Statistics, including Orlando’s own proprietary research, show advisors will lose clients, assets and fees over the next 30 years unless they begin to fundamentally change their practices now. As many as 90% of next-generation heirs fire their parents’ advisors in the first year after their parents die.
The majority of advisors have admittedly done little to prepare their practices or staff to mitigate the risk, say Orlando and a number of other financial services industry veterans.
“The data is compelling and truly shows the opportunity for advisors, which is the positive side of this story,” says Orlando, author of Legacy: The Hidden Keys to Optimizing Your Family Wealth Decisions. “The opportunity is lying right there. All the data says the next generation is open to it. But on the whole, advisors haven’t even begun to build relationships yet.”
The opportunities for advisors to retain and grow assets are staggering, “but the time to start working with the next generation is now,” says Vincent Valeri, a Legacy Capitals business consultant and coach. Valeri fired his own family’s advisor when he took over his father’s successful corporation—because the firm had failed to ever make him the client.
Preliminary results from Financial Advisor’s “2019 Retirement Survey” show that more than 50% of advisors do not meet with anyone beyond a spouse in a client family. (Look for final survey results at FA’s Inside Retirement conference and in an upcoming issue.) A stunning 67% of advisors admit they haven’t even met the “next gens” in their client base, according to a national survey Legacy Capitals conducted (see Figure 2).
Millennials, meanwhile, know their parents’ advisors are slacking and have done pretty much nothing to cultivate a meaningful relationship with them. A shocking 72% of millennials report that their parents’ advisors have never attempted to provide financial advice or counseling to them, although many say they’d find it helpful, the firm reports (see Figure 3).
“These coming decades can either be the most profitable in history for advisors or a struggle. It’s all up to advisors,” says Orlando, who was the director of Merrill Lynch’s Global Practice Management Consulting Group and a family coach for the firm’s national family office before launching Legacy Capitals. The company offers workshops, online training and coaching for help in things like leading client meetings. Orlando’s team is also hired by affluent families who want to make sure their kids are prepared for the wealth and responsibility they inherit.
On the business side, Orlando’s clients run the gamut from some of the highly successful investment advisor firms to the largest broker-dealers, trust companies and mutual funds, including J.P. Morgan, Merrill Lynch, Morgan Stanley, PagnatoKarp, PNC Hawthorn, Raymond James, UBS and Venturi Wealth Management, all eager to ensure advisors don’t let this wealth-transfer opportunity slip through their fingers.