“A journey of a thousand miles begins with one step” – Lao Tzu.
Advisors would be wise to draw from the wisdom of this quote as they ponder how to keep the children or spouse of their ultra-high-net-worth (UHNW) clients in the fold once they assume full control of the family wealth.
Whenever a client dies, it’s always a challenge for advisors to keep the adult children or surviving spouse on as clients. The data even shows that the current advisor is more likely than not to be fired when their clients pass away.
Investment News notes that 66 percent of adult children fire their parents’ advisor after receiving their inheritance.1 The problem is even worse with surviving spouses, as more than 70 percent of all widows dump the family advisor following their spouse’s death, according to Investopedia.2
When you consider the staggering amount of wealth that’s about to shift from the Silent Generation and Baby Boomers to their Millennial heirs, it’s clear this issue should be top-of-mind for all advisors. The stakes are especially high for those serving the UHNW community, which we define as having a net worth of at least $35 million.
Millennials, the generation born between 1980 and 1995, are forecast to inherit a record $30 trillion.3
Through our own analysis, and the Proving Worth study which we compiled in tandem with Campden Wealth, we’ve found that while advisors have done a solid job in serving the present wealth holders, they’re largely unprepared for the day when Millennials or widows begin calling the shots for the family investment portfolio. With this in mind, it makes sense to invoke Lao Tzu, and remember that multi-generational wealth planning is like a journey of a thousand miles, not a sprint or one-time event.
The New Rules of Engagement
So what must advisors do to retain the next generation of potential clients?
For starters, advisors must understand that the engagement strategies that have worked so well with the current wealth holders may not work with a surviving spouse – and certainly won’t fly with Millennials. In Millennials’ case, they’re not looking for an advisor’s assistance in finding philanthropic opportunities, since most have participated in the family foundation since graduating high school.
They’re also unimpressed with the concierge offerings that have been a popular tool for advisors in strengthening relationships with existing clients. This involves things like assisting with price negotiations for home or car purchases, booking travel and scheduling medical appointments.
What UHNW Millennials do want is assistance with finding impact investing opportunities, which seek to strike a balance between generating investment returns and benefiting society. They’re also looking for customized solutions from advisors, help with sourcing deals and the ability to interact more with them either in person or online.
The Keys to Retaining a Client’s Spouse and Adult Children
An easy first step is to devote meaningful time and attention to understanding what’s important to your client’s spouse. Get to know them personally. Take their temperature on how they want to be engaged by an advisor and how often they want to hear from you. Building a genuine relationship with spouses should be a top priority, and if you do it right, it’ll dramatically improve your odds of retaining them when the time comes.
But what about the next – and much harder – step; building connections with your client’s adult children? This is challenging because there are plenty of variables at work. For instance, maybe they live far away from their parents, or perhaps don’t have a close relationship. Maybe they may have an interest in the family wealth, or perhaps none whatsoever.
No matter what scenario applies to your client’s children, there is a clear path towards building relationships with them.
As an advisor, your role is similar to the Sherpas who help guide ambitious mountain climbers up Mount Everest. It’s incumbent upon you to tap into the emotional elements that shape a family’s core values and purpose. Financial services for UHNW families today are largely focused on the what – wills, trusts, estate plans, asset allocation, portfolio construction, etc.
Your path forward should be about the why, which means facilitating a discussion about the purpose of a family’s wealth, their vision for the future, the family legacy and the values they wish to pass on to the next generation.
A Guide to Conversations with Millennials
There are a number of ways advisors to wealthy families can engage the next generation in this discussion. One route is to plan a family wealth and values meeting where these broad topics are discussed collaboratively across generations. (Dennis Jaffee and Stacy Allred wrote an excellent white paper on how to conduct effective family meetings4.)
Another approach is to hold a next-gen client event around financial issues that interest UHNW Millennials the most. Through our research, we know this includes topics like wealth transfer, resolving family conflict, wealth preservation and impact investing.
The UHNW Millennials who participated in our Proving Worth study showed a keen interest in networking with people like themselves. Whether you believe it or not, they have friends all across the wealth spectrum, and in many instances, don’t get to interact with young people from similar backgrounds.
If you serve multiple UHNW families, perhaps host a networking event that allows their Millennial children to come together and discuss shared challenges and opportunities. This generation strives to network, and an event like this would offer a real opportunity to give them the type of engagement they crave from an advisor.
It may even help you successfully go the distance in your journey of a thousand miles.
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4 Source: Dennisjaffee.com↩
These views represent the opinions of OppenheimerFunds and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.