The wealth transfer of $68 trillion dollars over the next 25 years from one generation of investors to the next will be a historic watershed event for financial advisors. What is occurring now and over the next quarter century will change the face of the advisory profession because it is predicted that 80% of next-gen investors will look for new advisors. This presents a huge opportunity for financial advisory practices that take a long-term perspective and are able to create meaningful relationships with the next generation of their best clients.
Unfortunately, less than half of high-net worth advisory practices have established deep relationships with their clients’ children, a percentage that may be even higher according to many industry experts. The purpose of this blog post is to share with advisors proven ways they and their teams can build critical bridges that link them to their best clients and adult children.
Proactive Positioning
One of the best approaches to building relationships with the next generation is to position the importance of intergenerational planning during a client review. The senior financial advisor on a team (or solo practitioner) should share with the client that their role is not only to serve them but also their children and that the team’s goal is to act as a family office for all their financial needs, including developing an intergenerational plan.
The next step is to introduce a junior member of the team as a relationship manager for the client’s children. This will clarify the role of the junior advisor and outline the different touchpoints and action steps that they will take with the next generation. The final step is for the junior partner to suggest that the client email their adult children to introduce them to the team and start the relationship-building process.
Tactical Financial Planning
The foundation of next-generation relationship building is for a team to develop a highly personalized financial plan for each of their best clients’ adult children. This will provide opportunities for the junior team member to build a relationship with the next generation by giving them something with valid, perceived value. The financial plan organizes the next generation’s finances and provides recommendations for achieving their future financial goals. It is recommended to offer these plans complimentary to their clients’ adult heirs and to review the plan personally with them to create stronger, deeper connections.
Convey Roth IRA Benefits
A Roth IRA account is a great opportunity for the next generation to invest their money in a tax-advantaged account and start developing a retirement plan. The advisory team should recommend that parents help their adult children fund their Roth IRA account and even match their contribution. The Roth IRA takes advantage of the adult children’s lower tax rate and enables their investments to grow in a tax-advantaged account. This is a perfect combination of tax planning and long-term investment planning.
Stage Educational Events
The junior team member should conduct educational events for the client’s adult children, either virtually or in-person. The recommended topics for these events should include the basics of investing, mortgage options, establishing credit, the value of long-term planning, Roth IRAs, managing a 401(k) plan, insurance needs, and a Q&A session. These events should be conducted quarterly for the adult children of 5 to 10 families to keep the event intimate and interactive.
Schedule Family Meetings
The intent of a family meeting is to bring the team’s best clients and their adult children together to share their intergenerational financial plan and answer questions. This is an excellent opportunity for the next generation to understand their family’s wealth and financial plan and to develop a relationship with the financial advisory team.
Being Proactive Matters
The transfer of wealth from baby boomers to the next generation is a significant event that presents unparalleled opportunities for financial advisory practices. By proactively developing a relationship with the next generation, financial advisors can shape the circumstances of the wealth transfer rather than it shaping them and that will better secure their future as a financial advisor.
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