Amid the day-to-day pressures of financial services, it’s easy to forget the wealth you’re managing for clients today isn’t just fueling their current lifestyle. It will eventually enable their comfortable retirement and the legacy they pass on to their children. Cerulli Associates estimates that United States households will transfer $72.6 trillion to heirs over the next two decades. It’s what experts are calling “The Great Wealth Transfer,” and some wealth management firms are starting to get worried.
Studies show 80% or more of clients’ children will leave their parents’ advisors once they receive their inheritance. This means four out of five clients you have right now will pass their wealth onto their heirs, and your firm will be nowhere in the mix.
Of course, we all want our firms to be the exception to that rule. We want to ensure the rising generation we’re working with is still choosing us as their go-to advisors 50 years from now. But, of course, we also know a lot will change during that time: the industry, technology, client preferences, etc. We know generational financial planning means adapting to the mindsets of our current clients’ children and grandchildren while still sticking to the tried-and-true philosophies that drew their forebears to us. This isn’t easy. Everything can differ between generations: their perception of money, their financial goals and even their communication preferences.
However, younger generations need your help. Recent research shows that millennials and Generation Z are open to working with financial planners and are, in fact, crying out for guidance. Three-fifths of Americans, including 71% of Gen Z and 72% of millennials, say they don’t know where to turn for financial advice.
This presents an opportunity to go back to your roots. In financial services, it’s easy to get distracted by the details of each day. For instance, what’s the market doing this week? Can you transfer this immediately? How can you adjust the tax strategy for next year? It’s easy to forget that you’re in the business to help people. When you work with clients, their children and their grandchildren, you see generational wealth in action. By providing comprehensive financial advice, you can see your real impact on an entire family. Small suggestions you offer today can become the building blocks of a legacy that lasts generations.
But those simple suggestions are not one-size-fits-all; they change through the years. How you help someone in their 30s get on the right path will differ from how you help someone transition into a successful and meaningful retirement. That, in turn, will differ from how you help navigate a wealth transfer to the rising generation. The common thread is listening, understanding and doing what’s best for your clients.
Three Generational Financial Planning Strategies to Hold On to Clients
You might think it’s out of your hands, but the biggest factor in whether the next generation decides to continue working with your firm is you. If you and your advisors have multigenerational financial planning strategies and processes in place from the start to proactively engage the rising generation, then you have a greater chance of being the source of wisdom they turn to in the future.
1. Embrace Being a True Fiduciary
Always do what is best for your client, their children and overall family, even if it isn’t what will earn you the most money. The best marketing is providing a good service. Focus on that, and your clients will become your advocates. They’ll pass on that goodwill to their children. No matter someone’s age, they can always appreciate a job well done.
2. Embrace Innovation
Don’t be afraid to adapt and change, especially when it comes to the technology your team uses. An inability to embrace new technology and perspectives prevents younger generations from seeing your firm as viable. If you stay true to your values and embrace innovation, you’ll be setting yourself up to be a trusted partner for generations to come.
New technology has the added benefit of improving your team’s quality of life by taking on mundane and repetitive tasks. This attracts and retains the rising generation of talent, which will attract the rising generation of clients.
3. Build Relationships and Communicate With the Whole Family
A key multigenerational financial planning strategy is to take the time to get to know each member of the family, not just your primary client. This means communicating clearly and regularly. Make sure you’re speaking in a language your clients can understand that’s free from industry jargon and complex financial terms. Listen to their concerns and goals and offer personalized advice that takes into account the unique circumstances they face. By building strong relationships with every generation, you’ll be able to maintain trust even when the wealth transfers from one generation to the next.
The feelings of trust and respect your clients have for you are precious links between generations. The financial advisor job is so much more than just crunching numbers. It’s about understanding individual goals and needs, building a relationship based on values, and offering sound advice tailored to each client’s unique circumstances. As an advisor who truly cares about helping clients reach their goals, you should aim to stick with clients through every stage of their life journey.
Chris Kerckhoff is president and CEO of Plancorp, a wealth management company serving companies and families in 44 states and managing $6 billion in AUM.
