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Written by: Jack Giardino | Inflection Point Wealth Advice
As many of you know, the financial industry is in the beginning stages of one of the most talked about and anticipated events of our time, The Great Wealth Transfer. According to the New York Times, over the next few decades, beginning in 2022 and continuing until 2045, it’s estimated that $84 trillion in total assets is to be transferred from the baby boomers and the silent generation to their heirs. Of the $84 trillion, it’s projected Gen X (born 1965-1980) and millennials (1981-1996) will inherit $72 trillion, which is no small sum of assets.
For us advisors, this represents both a significant opportunity as well as a potential major challenge. The opportunity, a sizeable amount of wealth is to be inherited, and the individuals inheriting that wealth will likely be looking for advice and guidance on stewarding those assets. The challenge, studies show 80% or more of clients’ children will leave their parents’ advisor once they receive their inheritance.
When you create and cultivate relationships with the next generation, you potentially help them create better outcomes for themselves all while helping your current clients fulfill their wishes and desires by caring for those who mean the most to them. When you do that, the practice growth opportunity comes to you.
Leg up on the Competition
As mentioned above, the studies are not on our side regarding current clients’ children sticking with their parent’s advisors. While this might seem daunting, it presents a unique opportunity for those who are willing to take action.
In my view, there are a few reasons why you as the current advisor have a leg up on the competition when the heirs of current clients inherit wealth:
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Established Trust and Credibility - It’s likely there is a strong foundation of trust and credibility with current clients. This trust often extends to the clients’ families, making it easier to build rapport with the next generation.
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Insight on Family Dynamics - Advisors who have worked with families over many years, often have a deep understanding of the family’s dynamics, values, and goals. This insight can allow you to tailor your approach when approaching the next generation.
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The Easy Decision - Since you have the relationship and come recommended by the parents, there is less friction and effort required to partner with you vs. another advisor.
Advisors who leverage these advantages and who are proactively building relationships with the next generation have the opportunity to significantly differentiate themselves from the competition.
Strategies for Building Relationship
Successfully creating and cultivating relationships with the next generation doesn’t have to be a difficult and complex process. A few strategies for getting in front of the next generation include:
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Education Around Milestone Events - As current clients mention their heirs are experiencing milestones in life, such as entering the workforce, buying their first home, or changing jobs, offer to provide educational materials related to those topics. If desired, you can also schedule a meeting to cover this material in greater detail or to answer any questions on their minds.
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Family Meetings - Encourage your clients to have open discussions about their wealth and legacy with their heirs. While specific numbers don’t always have to be revealed, family meetings facilitated by you can be an excellent way to ensure everyone is on the same page regarding specific goals, estate planning, or other major decisions.
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Charitable Decisions - If you have charitably inclined clients, encourage them to bring their heirs into the decision-making process for how funds are being allocated to different charities.
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Open Communication - Encourage your clients to allow you to explain and communicate the reasoning behind any financial planning items related to the next generation. Whether it’s establishing 529 accounts, gifting appreciated assets, or other topics, it’s important to make sure the next generation has a full understanding of why different strategies are being implemented and how they impact them.
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Ask! - Ask your current clients to connect you to their adult children. Oftentimes, clients are hesitant to ask if you’d be interested in working with their adult children but are more than willing to make an introduction after you have asked.
Building a relationship with the next generation doesn’t happen overnight. It requires ongoing engagement and interaction. Stay in front of the next generation and always be there as a resource when needed.
The Time is Now
The upcoming wealth transfer is a pivotal moment for us advisors. As we enter the early stages of this wealth transfer, there is no better time than now to start creating and cultivating relationships with the next generation.
Through these relationships, we can better serve and deepen the relationships with our current clients, have the opportunity to prepare the next generation for stewarding the wealth, as well as carry your practice forward for years to come. Simple actions taken today can help turn the challenge of the great wealth transfer into a lasting opportunity for growth.