A Generational Wealth Strategy Is A Key Differentiator For Today’s Advisors

Be Part Of The 13%: Three Ways To Start Better Conversations With Your Clients’ Children
Todd Rovak, Co-CEO & Co-Founder, Carefull
Todd Rovak, Co-CEO & Co-Founder, Carefull

Securing assets through generational wealth transfer is top of mind for many advisors, but that attention doesn’t necessarily translate into action. While according to Cerulli only one in 10 children plan to keep their parents’ advisor, few advisors are actively looking to close that gap. In fact, recent Fidelity research indicates that despite the inherent opportunity, advisors reached out to children in only 13% of their client households.

In defense of advisors, this statistic makes sense. Advisors, who are busy managing portfolios, returning phone calls and focusing on business growth, aren’t left with much time to build multi-generational relationships. On top of that, engaging across generations is loaded with potential landmines. Parent-child relationships are complex, as are familial relationships with money. If an advisor is aware of a particularly challenging relationship, it might make more sense to steer clear. To further muddy the waters, many advisory firms face the fundamental challenge of understanding how to engage with and serve a new generation of clients.

But despite challenges, having a wealth transfer conversation with your clients is as crucial as it is potentially accretive. These three key steps can help advisors mitigate familial complexities, bridge the generational gap and set their firms apart.

Use The Rules To Your Advantage

Since 2018, FINRA Rule 4512 has required brokerage firms to ask their retail customers to provide the name and contact information of a trusted contact person. This compulsory data point on a client intake form can be the gateway to bridging the generation gap.

This compulsory data point on a client intake form can be the gateway to bridging the generation gap.

Emphasizing the importance of keeping trusted contacts up to date can be the catalyst for initiating the transition conversation with the older generation. For example, successfully confirming the adult child serving as the trusted contact creates an organic opportunity to reach out to the trusted contact, introduce oneself as the parents’ advisor, and offer a chance to ask questions or express any concerns. This simple act gets an advisor on the radar of the next generation and marks a key first step in building a relationship.

Act Before A Problem Surfaces

The hard realities of aging show us that it is not a case of “if” a problem will arise, but “when.” Problems encompass more than death, such as navigating money management in the face of a client’s cognitive decline or transitioning investment strategies as older clients enter into assisted living facilities. At best, these are massive milestones that benefit from an advisor’s deft hand in facilitating communication between parents and children to reach the best outcome possible. If left unchecked, though, they can become the moments when an adult child is quick to blame the advisor, exposing the advisor and the firm to potential liability.

Lack of communication is often the real culprit.

Lack of communication is often the real culprit, leaving both the advisor and adult child to deal with logistical challenges in the face of emotional hardship. But that doesn’t have to be the case. Simple, proactive communication by the advisor not only can mitigate these potential pitfalls before they become problems but also is likely to deepen the relationship through both generations – which can prove valuable to the advisor.

A recent study by Citizens Bank found that nearly three-quarters of Americans (72%) lack the financial confidence needed to manage a large influx of money on their own. Regular interaction, especially as a follow-up on trusted contact designation, would begin to cement the trust necessary to maintain the relationship post-wealth transfer.

Use Technology To Demonstrate How Much You Care

With regular contact now established, advisors can show the next generation why they have earned their parents’ trust and begin to build a real relationship with the next of kin. This is most effectively done by genuinely showing interest in protecting the financial well-being of the parents.

A key way to nurture multi-generational relationships is to protect their parents from the increasing probability of financial fraud as they age. The chance that clients will fall victim to fraud and the amount of potential loss, increases precipitously as they age. The threats are numerous and go well beyond simple identity protection because people become more trusting as they age, thus more susceptible to fraud schemes such as romance scams, or contributing to fraudulent charities, to name a few.

To protect a client, an advisor needs a solution that understands the patterns of a client’s transactions, alerts them when something seems to be awry, and then fixes whatever needs fixing. When these moments occur, the advisor is well-positioned to be a hero to both generations. Of course, this cannot be done at scale by an individual advisor, so the advisor must use a technology solution to aid in minimizing fraud, which will turn this incredibly complex problem into a strength for you and your firm.

Minimizing the possibility of victimhood is a simple but powerful way to show advisor value.

Mitigating risk is core to the role advisors play for their clients, and minimizing the possibility of victimhood is a simple but powerful way to show advisor value and demonstrate how much an advisor understands clients’ problems. The halo effect of these actions further cements the importance of the advisor across the generations.

The Case for Being Part Of The 13%

Forging relationships with the next generation of your clients will take time, but the results are worth it. Much can be said for the power of a consistent business, dependable growth in AUM, and the stability that comes from establishing and nurturing these multigenerational relationships. With only 13% of your peers even trying, it could become a powerful way for your firm to stand out.

Todd Rovak is the Co-CEO & Co-Founder of Carefull.

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