How Advisors Can Stop Losing Heirs as Clients

Over the next two decades, a staggering $68 trillion in wealth is expected to transfer from baby boomers to their heirs in what’s been dubbed the “Great Wealth Transfer.” For financial advisors, this tectonic shift presents both risks and opportunities. 

A startling 80% of heirs are likely to change advisors after inheriting wealth, according to industry studies. Firms that fail to proactively engage the next generation risk losing the very clients who will dominate the future wealth management landscape.

The Risks and Opportunities of Generational Wealth Transfers

The Great Wealth Transfer puts advisors in a precarious position, pitting short-term profitability against long-term survival. With trillions in assets set to change hands, the opportunity cost of inaction is simply too high to ignore. Yet, for most advisors, engaging heirs is currently a money-losing proposition.

Younger generations have less wealth and radically different expectations for how wealth management services should be delivered. “There’s a chasm between generations in how they want to deal with wealth managers,” notes Gauthier Vincent, lead wealth management partner at Deloitte Consulting.

Millennial and Gen Z clients demand a digital-first, planning-centric approach that many traditionalist firms are ill-equipped to provide. Upgrading technology and refashioning service models requires substantial investments that can erode near-term profits. 

However, those short-term costs pale in comparison to the long-term peril of failing to adapt. “I predict that half of financial advisors will be gone in the next 10 to 15 years,” warns Ric Edelman, founder of Edelman Financial Engines. Firms that aren’t laying the groundwork now to retain heirs as clients may not be around to serve any clients in the future.

Strategies to Retain Clients’ Heirs

To stem the tide of intergenerational asset attrition, forward-thinking advisors are employing several key strategies:

Offer Financial Planning to Heirs at No Cost Until Age 26

One innovative approach is to offer clients’ children free financial planning until they reach age 26, the age at which most are removed from their parents’ health insurance. This aligns with research showing that 20% of high-net-worth investors want advisors to build relationships with their adult children as young as 18.

Providing complimentary financial advice can be an effective way to establish trust and credibility with heirs. However, such programs must be carefully structured. Firms need clear parameters around the time and resources allocated to avoid overburdening advisors. 

Crucially, the child must proactively opt into the service.

 A 25-year-old heir is unlikely to engage with an advisor chosen for them; they must feel a degree of autonomy in the relationship.

Involve Multiple Generations in Estate Planning

Another way to forge connections with heirs early is through multigenerational wealth transfer and trust services. By facilitating family meetings and tailoring estate plans to each generation’s needs, advisors can demonstrate their value in navigating complex family dynamics. “We do a lot of legal work involving multigenerational estate planning, so that gets us involved with kids,” explains Peter Mallouk of Creative Planning, an RIA serving ultra-high-net-worth clients.

Establishing relationships with heirs through estate planning can lay the groundwork for retaining their assets after wealth transfers occur. 

While it doesn’t guarantee that heirs will stay with their parents’ advisor, it improves the odds by allowing advisors to prove their worth to the next generation.

Adapt Service Models and Pricing for Changing Demographics

To appeal to younger clients, firms must shift from an investment management focus to the kind of planning-centric services heirs expect. “Seventy-five percent of advisors don’t do financial planning,” asserts Ric Edelman. “Kids see the services their parents are getting, and it’s not what they want.”

In addition to expanding financial planning capabilities, firms may need to revisit pricing structures to profitably serve heirs. By “householding” family assets, advisors can extend discounted rates to heirs without dropping their minimum asset threshold. 

For Chuck Failla’s firm, Sovereign Financial Group, that means allowing kids to pool assets with parents to secure a 0.5% fee on assets over $1 million. “Any advisor looking to be in full swing business in five to 10 years better have a service model capable of running on lower fees,” says Failla.

Enhance Digital Capabilities to Meet Heirs’ Expectations

Perhaps the most crucial shift firms must make to retain heirs is in upgrading their technology. Younger investors expect on-demand access to their financial lives and seamless digital communication with advisors. 

Clunky manual processes and quarterly paper statements simply won’t cut it. “If firms are slow to embrace the digital transformation of the business, more people will change advisors,” cautions Vincent.

For larger firms, building bespoke digital platforms may be feasible. However, smaller practices will likely need to harness the scale of custodial platforms and fintech partnerships. By leveraging tools like eMoney and Orion for data aggregation, performance reporting, and client portals, even solo advisors can deliver the kind of modern digital experience heirs demand.

The Urgency and Upside of Engaging Heirs

With $68 trillion on the line, the cost of inertia is simply too high for wealth management firms to bear. Heirs represent the future client base of the industry – ignore them at your own peril.

As the pace of wealth transfers accelerates in the coming decade, firms that have already laid the groundwork to serve heirs will be positioned to capture assets in motion. Those still playing catch-up risk being left behind permanently.

Beyond defense, proactively pursuing heirs as clients presents an enormous offensive opportunity. 

By bringing younger clients into the fold, firms can diversify their demographic mix and plant seeds for future growth. Even if heirs currently have fewer assets than their parents, getting in on the ground floor of those relationships is an investment in the longevity of a practice.

How to Retain Assets For Your Wealth Management Firm: Final Thoughts

For wealth managers accustomed to serving older clients with significant assets, retooling to accommodate less wealthy heirs may feel like a distraction. 

It requires investments in technology, planning resources and new pricing models that can sting in the short run. But the long-term math is clear: engaging heirs is non-negotiable for any firm that hopes to be serving clients a decade from now.

Advisors can turn a demographic threat into an opportunity by taking proactive steps to build relationships with clients’ children, adapt service models to younger generations’ needs and expectations, and digitally enable the delivery of advice. 

The Great Wealth Transfer will remake the wealth management industry in the coming decades – will your firm emerge stronger or weaker? 

Taking action now to cement a multigenerational value proposition is the key to not only surviving the $68 trillion wealth transfer but harnessing it as a transformative opportunity.

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