Clients’ children usually inherit their parents’ wealth. That means smart advisors should seek creative, resourceful ways to persuade those adult children to become clients themselves.

True, there are cases when an advisor may not want to work with a particular client’s offspring.

“We learn enough to know whether they will be a pleasure to work with or not,” says Marjorie Fox, founder of Reston, Va.-based Fox Joss & Yankee, also known as FJY Financial. The firm has $400 million in AUM.

Given the number of asset-poor siblings who expect to inherit the same wealth, some clients’ adult children represent a mathematically unpersuasive business proposition for her firm, Fox says.

Providing financial planning services to their parents, who may, for instance, have $3 million in assets, takes less time than it would to offer the same service to three adult children. But the total fees for Fox’s firm would not change under the second scenario, as they would be based on assets, not number of family members.

In general, though, signing up the next generation of clients should be a goal for advisors.

“Certainly, it’s an objective because, at some point in time, the clients you have get old and die, and the assets go to their children,” says John Burns, the CEO of Exencial Wealth Advisors, a firm based in Oklahoma City, with $1.4 billion in AUM. It can be a challenge to entice these new clients, however.


The good news: Fox, Burns and other advisors say there are certain techniques that have helped them forge relationships with the children of clients. Here are seven that have worked for them:

1. Provide extra services for the whole family. Some of the Fox firm’s clients have worked with advisors there for two decades and amassed $15 million in assets. The adult children “are doing well on their own,” and stood out as attractive prospects for the firm, Fox says. As a result, advisors went the extra mile and helped the family establish a special-needs trust for one grandchild of the client’s. “We could really add value in a concrete way,” Fox says.

After creating that trust, all the client’s adult children became clients. Advisors should seize similar opportunities to help clients’ children when they struggle with what Fox refers to as their “pain points” — financially significant junctures in their lives. These may include the birth of a child or the onset of a major illness. It is then, Fox says, that adult children start to recognize financial planning can play a leading role in their happiness.

2. Hire advisors who are the same age as the adult children. Of the 12 FJY advisors, eight, or more than 55%, are younger than 30. That age ratio among advisors has made it possible to have a knowledgeable staff member who is the same age as clients’ children (or sometimes younger) serving as an integral member of the team.

3. Offer front-end discounts. To entice the adult children of clients with have $3 million to $5 million in assets, if Fox considers them good prospects, she offers a bargain: She’ll advise the children at the same rate that she charges their parents, even though the children may have accumulated only $100,000 on their own. “We want to make it attractive and encourage an advisory relationship,” Fox says.

The discount, however, is not open-ended. Within three years, the adult children who have signed up for the discount have pledged, based on their income, to accumulate a pre-set amount of assets, or forgo the lower fees and start paying at higher rates. Either way, Fox’s firm will get the same revenues if the relationship continues.

4. Help adult children learn how to invest family funds. At Exencial Wealth Advisors, CEO Burns asks his high-net-worth clients to allow him to help their adult children invest a small percentage of the parents’ assets — what is essentially an education in investing, with training wheels. He usually asks the parents for somewhere in the neighborhood of $20,000 to $30,000, “not enough to be consequential” for those high-net-worth clients, he says, as a way to start the exercise.

The strategy helps accomplish several goals beyond securing a next-generation client, Burns says. The exercise empowers adult children “and makes them feel confident about managing money.” Burns schedules quarterly meetings to advise the children on investing the sample-size assets.

5. Focus on multi-generational planning. Brian Fricke, principal of Financial Management Concepts in Winter Springs, Fla., has selected just a few of his clients’ children whom he targeted as prospective clients.

He succeeded in making them clients by taking steps to “stress the advantages of multi-generational planning.”

One specific multi-generational strategy that works well ,but is also effective at securing relationships between clients’ adult children and Fricke’s firm, hinges on the timing of tax-deferred qualified retirement account withdrawals.

Fricke has advised clients who are parents of adult children to plan to take more than their required minimum distributions from their tax-deferred qualified retirement accounts and give the extra money to the next generation. Fricke’s firm has then helped the clients’ adult children manage those funds and other assets.

Most significantly, Fricke says he clarifies for both generations the advantages for the entire family when parents take more than their RMDs from those accounts. By doing so, the parents fall into a lower tax bracket than the one their adult children are likely to come under after inheriting the parental assets. If the parents take the money out earlier than required, the family, as a whole, pays less in taxes.

6. Schedule regular meetings with the entire family. Although this tip seems obvious, Matt Cooper, president at Beacon Pointe Advisors in Newport Beach, Calif., with $7.5 billion in AUM, believes the strategy is critical to securing relationships with clients’ children. He sets up family meetings with first-generation clients and their children, even if those children are just teenagers.

7. Hire more women to bond with clients who are mothers. To ensure family meetings lead to blossoming relationships with clients’ adult children, Cooper puts the women staff members of his firm front and center during the sessions. Cooper has partnered with and hired women who serve at Beacon Pointe as managers, advisors and support staff; women make up 65% of the firm’s employee roster, he says. That gender balance is crucial for developing family ties, and has led to many in the next generation signing up as clients.

“Our women connect with the wives in the first generation, and that’s who tends to be acutely aware of the well-being of the next generation,” he says. Stated simply: The women at his firm bond with the wives of his clients, who then make sure their children become his firm’s clients.  

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

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