Advisors need to think beyond the individual client and start taking a more proactive approach to multi-generational wealth management, says Julie Littlechild, CEO of Advisor Impact. Littlechild was speaking at the Small and Independent Dealer Symposium, sponsored by the Investment Industry Association of Canada (IIAC) in Toronto earlier this week.
Failing to take a tactical approach to inter-generational wealth transfers can often mean losing a family’s business when the client dies. According to a study by Bank of America, less than 50% of surviving spouses will stay with their current financial advisor when a transfer occurs following death. The numbers are even worse when assets are passed to children; less than 2% of money transferred between generations will stay with the same financial advisors who manage those assets today.
“By 2020, [members of] the majority of upscale and affluent households will be 65 years of age or older and over the next decade an estimated $767 billion will move from one generation to another,” says Keith Sjogren, senior consultant and managing director at Investor Economics. “The advisors who are only focused on individual relationships, without family involvement, are going to quickly lose touch with this $767 billion.”
As a result, advisors who wish to retain these clients need to take a closer look at their book of business and start building relationships that include both spouses and the children, says Sjogren.
“What we are seeing is that many advisors do not even know the names of their client’s children, let alone met them in person,” says Sjogren. “So, they have no idea where this money is going to shift.”
Another speaker suggested that advisors take a very direct approach with clients when it comes to inter-generational transfer. Indeed, Glen Kuatt, vice-chair and principal of Savant Capital Management, headquartered in Rockford, IL, makes it a requirement for his registered investment advisors to meet the spouse of every client who joins the firm. As well, Kuatt suggests that advisors ask to see a client’s will and discuss with them how assets will be distributed on death.
“The value add for your advisors is to ask a few simple questions, such as, ‘When is the last time you had a family meeting? Do you have a will? May I take a look at it?’ The majority of clients will just hand it over,” says Kuatt. “The money is there and it’s going to be transferred, so it is up to the advisor to grab that opportunity and start intergenerational planning as soon as they can.”