The children of the wealthy have different ideas about financial advice – and those who provide it. Understanding that mindset can help retain families when wealth transfers take place
Transfers of wealth from one generation to another can range from trouble-free to tortuous. But one aspect of the intergenerational divide that financial advisors can facilitate is the advisor’s relationship with their clients’ adult children. Success on this front can both reduce trauma for families and help grow the advisor’s practice.
It’s therefore prudent to develop meaningful relationships with the younger generation long before the transfer of family assets, notes Francis D’Andrade, senior vice president, innovation, and associate portfolio manager with Forstrong Global Asset Management Inc. in Toronto. “Most of these younger family members typically don’t trust anybody older to give them advice,” he says. “They tend to rely on social media and peer-to-peer recommendations.” Partly as a result, they usually fire their parents’ advisors unless these advisors have previously gained their trust.
This generation also tends to hold negative perceptions of financial advisors and be more confident in making decisions on their own, compared with their parents, says Larry Distillio, assistant vice president, practice management, with Mackenzie Investments in Toronto. “You must recognize that they grew up during the [2008-09 global] financial crisis and are influenced by the outcome,” he says.
As a result, if you hope to keep these families as clients, you need to modify the strategies and practices you used to provide services to the parents: younger family members want their advisor to be comfortable with social media, understand the power of digital tools and know how to explain the financial system plainly. “You will have to meet their needs on their terms,” D’Andrade says.
Distillio recommends hosting family meetings to get to know clients’ children better – and also to allow the younger generation to get to know you and your firm. At these meetings, you should make the younger generation aware of the role you play in the financial affairs of their parents. Once a trusting relationship has been established, issues of special concern to them, such as wealth transfer and estate planning, can be discussed. “Give them the opportunity to ask questions and ensure that your answers are clear and simple,” advises D’Andrade.
You may be reluctant to accommodate the needs of the next generation, even though such modifications may not require fundamental changes, says Alice Ambrosie, vice president of regional sales with Franklin Templeton Investments Corp. in London, Ont.: “All that’s required are some tweaks to [your] business model to capture the assets of the entire family.”
For example, vehicles for communicating with younger clients should be sensitive to their preferences. That generally means that you should be boosting your online presence, including using social media to convey information. The next generation “prefers succinct, bite-sized communication, which is simple and easy to understand,” says D’Andrade, adding that communication should follow a regular format that is likely to be more frequent than for non-high net-worth clients. Client communications also should be compatible on all platforms, with round-the-clock availability.
However, the face-to-face meeting still has its place. Indeed, Distillio estimates that 80% of younger clients request personal meetings with their advisors: “They prefer tech for communication, but tech is not a substitute for personal meetings.” Such meetings could, nonetheless, be booked online. You also can invite parents and their children to events that both can enjoy together, D’Andrade says. This might include meals, a round of golf or a concert.
Another way you can connect with both generations is by discussing philanthropy, notes Distillio. He says making investment decisions while accounting for social responsibility can be a meaningful way to build bridges to the next generation.
When getting down to the nitty gritty of financial discussions, Ambrosie says, younger family members appreciate when advisors use up-to-date tools, such as infographics, to illustrate complex material. But avoid coming across as an all-knowing elder, she cautions: “They do not want to be lectured; they don’t want to feel like Mom or Dad is speaking to them.”