The greatest intergenerational wealth transfer is on the horizon. In fact, studies report that $1 trillion will pass to the next generation every year for the next 50 years. As the wealth created by baby boomers is passed on to children and grandchildren, financial advisers who have worked hard to establish their firms may begin to see their own wealth dwindle. That’s because some 90% of children who receive an inheritance will not keep their parents’ financial adviser.

While this might sound dramatic, the trend is not new. For some time, women in large numbers have been changing financial advisers after their husbands die. The problem is the same with children and grandchildren. Advisers often focus their efforts on the patriarch of the family without building a relationship with their spouse, partner, or other family members. Now when wealth transfers from spouses or one generation to the next, it more often than not also transfers out of the adviser’s firm. So, how can advisers help their clients manage this epic generational wealth transfer while continuing to build their firms?

One way for firms to connect with younger generations is to hire advisers in the same age range. Often Gen X and millennial family members look for a different type of relationship with their adviser. Instead of the typical business dynamic, they often look for a trusted friend in advisers, one that also helps them make financial decisions. Having a more personal relationship helps advisers understand what is most important to these clients and how to meet clients' goals and needs. Additionally, younger advisers may be more willing to embrace technology that offers clients greater accessibility, instead of formal business hours.

While the wealth creator maintains their relationship with the lead adviser, hiring younger advisers to connect with younger family members can strengthen future relationships well before the younger generations receive any inheritance. Respecting each generation’s unique perspectives and needs goes a long way in creating a lasting sense of trust. Additionally, the practice head may look to younger advisers to jumpstart their business succession planning.


What UHNW families really want from their advisers
Planners are the single biggest influence on financial decision-making for UHNW clients and their family members, a recent industry study says.

Sometimes advisers and wealth creators take too long to include younger family members in their financial making decisions. Receiving an unexpected inheritance is like winning the lottery. It can be very difficult to manage sudden wealth and it can be lost very quickly. In addition, clients become uneasy with advisers who they feel keep information from them.

Some families hide their wealth from younger generations. They don’t want their children to know how wealthy they are or rely on that wealth. However, without a solid understanding of their family’s affluence, some may be unprepared to handle it. Both families and advisers can benefit from early communication, education and preparation.

Intentionally educating younger generations is not just about maximizing dollars but maximizing the preparedness of the generation receiving the money. Do they know how the wealth was created, and how to preserve and grow their inheritance? Do younger clients know the origins of the family business? What principles and values were exercised to create the wealth?

Many wealth creators expect the second or third generation to know how to manage the family business and wealth. But, these are learned behaviors. Advisers who educate their clients, not just about money management but also on the principles that created the wealth in the first place, are setting themselves and their clients up for greater success.

If advisers view wealth transfer as a generational transaction only, this is a shortcoming in their practice. Advisers who take steps now to build a stronger relationship with younger generations by educating them about the growth and preservation of their wealth, will increase the profitability and longevity of their practice, not to mention the multiple they can demand when they sell their practice.

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