Advisors risk
Almost an even split, 42% of next-gen heirs planned to stay with their parents' advisors, 43% planned to leave, and 16% were unsure, according to
Fit mattered as much as familiarity. Among those planning to leave, 38% cited a difference in investment philosophy, and 33% said their values didn't align, while 26% said they didn't personally know the advisor, and another 26% didn't trust them.
To win those heirs, they need to be in the room. But how they're brought in, and what gets discussed, determines whether it
With that in mind, Financial Planning gathered some pitfalls that can arise when advisors reach out to the children or other potential heirs of current clients, along with the concrete moves advisors can make to increase successes.
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Pitfall: Surprising parents instead of inviting them in
Linda Eaton, executive vice president of Cannon Financial Institute in Athens, Georgia, offers advisors counsel on how they can improve next-gen relationships. She has seen advisors get the timing right — and wrong — when they speak with clients about bringing heirs into the picture.
Rather than tell clients to "bring in the family, put it in the form of a question." Framing that question requires a bit of finesse, though. Eaton advises avoiding following a script of any sort, and instead focusing on family dynamics.
For instance, set up a scenario in which an heir comes into money they are unprepared to receive. Advisors and clients can then discuss what that looks like for the heir.
"Never tell when you can ask," said Eaton. "The client can't say it until they can see it, envision it and imagine it."
Pitfall: Timing around when to reveal dollar amounts
Often, advisors find that wealthy parents might not want their offspring to know how much money they will inherit. This detail means that when advisors consult with an entire family, they must balance confidentiality and discretion with the need to keep heirs informed and otherwise prepared for what is coming.
But before the dollars or cents enter the chat, advisors can approach the discussion by cutting the money out entirely.
"It is absolutely possible to have a principle-based conversation without revealing the numbers," Eaton said.
Instead, by turning the conversation into a more goal- or values-oriented discussion, advisors can gently break the ice before getting to the more nitty-gritty objectives. Topics can include what the parents want their children to do, know or accomplish before they inherit any money.
Emily Boothroyd, a wealth manager at Wilton, Connecticut-based Merit Financial Advisors, asks clients to clarify what they would like to do for their children and the world at large. She also asks, "What are things that keep you up at night when you think about your money?" she said.
The parents' wish list then becomes the advisor's planning agenda when it is time to speak with heirs.
After there is an agenda, advisors can then send it to the family members and follow up individually, "that way you establish that you are the family advisor," said Eaton.
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Pitfall: Making it feel clinical instead of personal
At times, the advisor's desire to bring heirs into the fray can backfire. Overeager advisors who open with the wrong question, by being too blunt or insensitive, can set an already tense meeting on edge.
Knowing what to ask and how to ask it is the first step.
"If you just walk up to a client [and ask] 'what are your estate planning concerns,'" said Boothroyd, it could catch the client off guard. When it comes to a response, "It's a 'well, I don't know. I don't know what I should be worried about,'" Boothroyd added.
A better approach involves remembering that "clients make decisions from the emotional part of the brain," said Eaton. "When you're thinking about the family issues, you want to make sure that you're really going to that emotional part."
By treating the meeting more like a casual "get-to-know-you" opportunity and less like a formal intake procedure, advisors can reassure both clients and heirs that they are in this together. It is also an opportunity to showcase solutions to the dilemmas that arise and reassure them that everything is easier to manage with calm, measured assistance.
The best thing you can do is get in front of their children [and] talk to them, demonstrating your expertise and the level of care and knowledge you can provide," said Laura Bereiter, of White Oaks Wealth Management in Minneapolis. "This is a great way to show them the level of care they would also get as a client."
