Investing games and Star Wars: How to engage HNW kids

April 17, 2019 12:45 PM

Financial advisors who aren’t building relationships with their clients’ kids are taking a huge risk: Losing a chunk of their business.

The industry is approaching a $30 trillion wealth transfer, and financial planners need to make sure they are ready for it. By engaging the rest of the family, advisors can take steps to guarantee that their HNW assets won’t be moved elsewhere when a client passes away.

From family vacation funds to stock-picking games, here are some tips on how to start getting to know your HNW clients’ children now, before it’s too late:

Don’t act superior

"I don't know if I would have listened to a financial planner at 22," says Charles Weeks, founder of Barrister Wealth Management, who is now 40. Weeks offers his clients’ children a basic financial plan at milestones such as graduating from college.

But getting young adult children to plan their finances can be a hard sell, and about half are simply not interested, he says. "Don't act superior to them because [they're] younger," he says. Explain and make things concrete by showing actual dollar amounts. "Bringing yourself to their level and acting as if they're you're equal will get you a much better response," he says.

Ask for an introduction

Tell clients how a conversation with their children can help them. “I discuss how I can add value during life’s milestones such as college, first job, marriage and having children of their own — and half of my clients have accepted my offer to meet with their kids,” says Sandra McPeak, a managing director of investments at Wells Fargo Advisors.

McPeak also shares her Family Letter with clients. “It is a succinct list of everything my kids would need to know about our assets and related topics if we die suddenly and they need to step into our shoes,” she says, saying it helps clients visualize how to start a conversation with their kids and make their own list.

Make a family vacation fund

Try creating a fund that kids can grow through investing, suggests Frazer Rice, senior wealth strategist at Calamos Wealth Management. Even young children can participate. If the assets grow, children get to discuss what they want to add to their vacation. If they lose money, they will have to discuss how to scale back their plans. The financial advisor can step in with more detailed lessons on financial literacy.

It’s a low-stakes way to give children a sense of risk and reward and help them understand the consequences of their decisions, Rice says. Learning this earlier on can help children avoid making bad decisions later. "They've touched the stove," Rice says.

Host engaging events

Advisor Mark Hogan of Snowden Lane Partners rented out a local movie theater in San Antonio the night before a Star Wars debut. Clients brought children and grandchildren to watch the movie five hours before the midnight premiere. “Their grandchildren think they are very cool to get them into the movie before everyone else sees it,” Hogan said in an email. “For our clients without family in town, they tend to bring a friend or neighbor, so we also meet some new potential clients in a very non-threatening environment.”

Play a game

Following a company with a client’s kids can help them better understand finance, said Scott Pedvis, a managing director of investments at Wells Fargo Advisors. “I ask them to think of a product or service they really enjoy … We identify the parent company and make a game of following the stock of that corporation,” he said. Pedvis provides the children with research on the company and then they discuss earnings and annual reports. “The best way to engage is through something the children find interesting,” Pedvis said.

Encourage parents to instill good habits

"Wealth does not automatically create deep personal finance knowledge," said Carol Fabbri, managing partner of Fair Advisors. That's why she runs money workshops for her clients' adult children. Not only is it “a lifelong skill,” she says, it also helps protect them from being swindled.

Even for adults, though, finance can be boring. To get them on board, she encourages parents to plan something fun as a family, like a nice dinner, to celebrate the end of her class.

Fabbri also tells clients to encourage their children to save, “[whether the] habit is putting away a dollar when you're six or putting away $1,000 when you're 25.” Parents can match allowance money saved or, for a grown son or daughter, match money saved for the down payment on a home.

Be tech-friendly

Adopting tech-forward solutions is a step in the right direction, as clients’ kids tend to be more digitally native, said Dan Steichen, founder of Personal Wealth Partners, an RIA at LPL Financial. “We use the tech to ease and facilitate the basics of opening accounts and provide robo investment options,” he said. However, don’t underestimate the impact of a personal relationship, Steichen warned. The need for those crosses generations.

Hiring younger advisors to work with the next generation of clients can also help. “The younger advisors participate in the family meetings we occasionally hold for our clients, which helps ... to ease the transition of the younger clients to the younger advisors,” Steichen said.