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Financial Advisors who want to provide stellar service, accelerate or resume growth and preserve assets under management can take steps now to develop win-win relationships with their clients’ heirs.
A lot of advisors face a similar dilemma. As their practices have matured and their clientele has grown, their clients have matured too. As their clients retire, entering the distribution phase of life, many advisors have found it much more difficult to grow their practices.
Assets under management go into a slow, steady decline but the time necessary to generate new business is occupied by existing clients.
The decline in assets is exacerbated by the common practice among growing advisors of referring their younger, less affluent investors to junior advisors or investment management platforms that are better suited to younger investors’ more modest circumstances.
This idea looked great at the time. The advisor recognized that her more affluent clients had more complex requirements, so she chose to focus her time, attention and talent where it was most needed. Longer term, though, the outcome is a book of business that is heavily weighted with investors from the same wealth accumulating generation.
So what can you do?
The most obvious answer is, of course, to establish a relationship with your clients’ kids and grandkids. Do this, and you have the next generation or two already predisposed to choose you as their advisor when the time comes for them to start investing on their own.
But wait. Didn’t I just say that it’s hard for an advisor to serve their older, wealthier clients and bring on younger, less affluent clients?
Yeah, I did. But in the case of investors and their heirs, there are ways to solve this time crunch and keep every generation happy. Here’s how…
Work with your client to engage their children early, when they’re still in primary or secondary school. Encourage your client to include them at your next review. Spend some time telling the kids why mom and dad invest. Show them how you work with mom and dad to help them achieve their financial goals.
Don’t get into the details. Just introduce them to the importance of planning, diversification and discipline. Show them how you help their mom and dad. They’ll see you as an important part of their parents’ lives and you’ll win a place of high regard in their (and their parents’) minds.
Work with your client to set the kids up with a small fund account (diversification). Get them used to seeing their statements and your regular client communications.
When they’re ready to start investing for real, let them know that you will be asking a colleague to help with their account for now, but you’ll always be on hand to answer questions.
Keep them on your mailing list. When the time comes, let them know that you are ready to serve them as you have their mom and dad.
Work with your client to engage, educate and prepare their young adult heirs
By the time they complete their educations, start work and are making their own investments, possibly with someone else, heirs are probably pretty curious about their parents’ finances and wonder what the implications for them will be.
Now is the perfect time to arrange for a family meeting. In this setting, you can educate the entire group about the plan to help with your clients’ retirement and estate. Discuss the clients’ Investment Policy. Show how the their financial plan and investment portfolio support the policy.
Feel free to include the clients’ estate attorney and other trusted partners in the discussion. AtD.A. Davidson, our trust company published a workbook titled “What My Family Should Know”, an invaluable instrument for discussing and recording important family matters like the whereabouts of assets and insurance, and the clients’ end of life wishes.
The key here is to be a participant in the process. Don’t just send the workbook to your clients. By organizing the discussion, you establish authority and credibility with the heirs. Let them see the wisdom and expertise you bring to their parents’ financial plan and its execution.
At this stage in the heirs’ lives, they probably don’t yet meet your account threshold. Make a decision about whether you have the capacity to add the relationship to your existing workload. If not, refer the heir to a less labor intensive platform. Again, keep them on your mailing list. Offer to be a resource whenever they have questions.
Work with your client to recruit the assistance and support of their mature heirs
Clients who have entered retirement may have children who are well into their saving and investing years. If these heirs are not investing with you, then attracting them will be difficult.
It makes sense. You know first hand how powerful the bond of trust is between an advisor and a client. Still, tens of thousands of investors a year switch advisors. An older heir might very well choose the advisor who served her parents so well!
As above, meet with your client and the heirs to discuss their plan and investments, then broaden the conversation to include roles and responsibilities – living will requests, executors, trustees, beneficiaries and more. Demonstrate your command of the client’s financial plan and your commitment to contributing to your client’s well-being, and the ongoing well-being of her family.
Want to win your clients’ kids’ business? Include your client’s family in the conversation from the outset. By encouraging their involvement, you open critical lines of communication and provide a valuable education.
In a business based on relationships and trust, this strategy is sure to pay dividends.
How do you connect with your clients’ children? Do you consider the next generation in your business development activities? What systems or resources does your firm or custodian provide to help you manage relationships with heirs? If you choose to include beginner investors in your client base, how do you manage the time?