The unfolding inter-generational transfer of wealth from Baby Boomers to their descendants presents challenges and opportunities for trusted advisors.

If there is a “meta-theme” that underlies many North American wealth managers’ plans and strategies, it is how to keep clients as a multi-trillion wealth transfer goes ahead. To grapple with this topic are Susan R Schoenfeld and Carol R Kaufman – both are well-known to many readers in the Family Wealth Report community. (More on the writers below.) The editors are pleased to share these insights and invite replies and feedback. The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com

The largest generational wealth transfer in US history has already begun. Between now and 2045, a total of $84.4 trillion in wealth is expected to pass to beneficiaries or charities in the US, according to a report from Cerulli Associates, a Boston research and analytics firm. Most of the money (63 per cent) will come from Baby Boomers. (1)

Almost 10,000 Boomers (born 1946 to 1964) turn 65 every day, and about half the country’s wealth (over $75 trillion) is in their hands. The Cerulli report expects a gradual shift in demographics, finances and responsibilities to Generation X and Millennials (born 1981 to 1996). Gen X will inherit the most at $29.6 trillion; Millennials are next with $27.4 trillion, followed by Gen Y ($11.5 trillion). (2)

Most research shows that fewer than 20 per cent of adult children of affluent clients will remain with their parents’ financial advisor after inheriting their parents’ wealth, because they have very different expectations of how they want advisory services delivered to them. (3)

Snappy Kraken, a MarTech innovator, one of the largest marketing research companies serving financial services professionals, released a survey on February 7, 2023. In the next 18 months, 52 per cent of high net worth (HNW) retirees and pre-retirees will consider employing a new financial advisor because they aren't satisfied with their current one. (4)

Trusted advisors to HNW baby boomers, such as financial advisors, wealth managers, and estate planning attorneys, recognize that retaining the next generation of clients is critical for the long-term success of their business. The question is how to best accomplish this?

Pain points
The most important pain points for trusted advisors to consider, in retaining next-gen offspring as clients, is that they aren’t investment focused. Rather, they’re the “soft” or human aspects, which actually turn out to be the “hardest” category to navigate:

1. Communication: Trusted advisors may struggle to communicate effectively with next-gen clients, who may have different communication preferences than their parents. Millennials and Gen Z, for example, tend to prefer digital communication and may be less likely to engage with traditional communication channels such as phone calls or in-person meetings, or even email.

2. Different values and priorities: Next-gen clients may have different values and priorities than their parents. For example, they may be more interested in impact investing, or even combining their investing and philanthropy into Environmental, Social and Governance (“ESG”) investing. 

3. Tangible assets: Certainly, we see different values occurring in what physical assets next-gen family members want… or don’t want. Classic china and crystal? Generally, not! Silver? No! Perhaps an occasional family heirloom if it has special meaning to the family member. 

4. Lack of trust: Next-gen clients generally don’t have the same level of trust in their parents' advisors as their parents do and may be more skeptical of financial advisors in general. 

5. Inexperience with managing wealth: Next-gen clients often don’t have experience of managing significant wealth. They may not have all the information needed so they can be properly advised, and possibly don’t even know what that missing information might be.

6. Competition from other firms: Trusted advisors may face competition from other firms that are actively seeking to attract next-gen clients. 

7. Demographics: The future of wealth is women.  According to Oliver Wyman, women represent more than 40 per cent of HNW individuals globally. This is expected to grow strongly over the next decade, as Baby Boomer men die and pass on control of their wealth, first to their spouses and then to their children. This will be one of the biggest and most important relationship growth opportunities in the next decade. (5)

8. Aging of advisors. The average age of trusted advisors is 55. Many are already thinking about retirement and yet don’t have a multi-generational, client-facing team. (6).

By understanding these pain points and developing strategies to address them, advisors can build strong relationships with the younger generations of clients, securing the long-term success of their business.

Strategic opportunities
Creating a bond and building trust takes time, however. One way to begin forging a relationship with the younger generation is to consider their beliefs, concerns and pain points, and then determine how to most effectively help them.

Some ways trusted advisors can keep their clients’ grown children engaged with their firm:

1. Establish a connection: Trusted advisors may try to establish a personal connection with their clients’ children, whether through in-person meetings, phone calls, or email or even text exchanges. They might also attend family gatherings to get to know their clients' children better. 

Robert J Sofia, co-founder, and chief executive of Snappy Kraken, says: "To achieve meaningful connections with clients, advisors must take care to regularly check in via email and text message." 

2. Provide education: Trusted advisors may offer educational resources and materials tailored to the next generation, including not only investing, estate planning, philanthropy, and other financial topics, but also time management, identifying values and even interpersonal relationships. 

3. Offer a holistic approach: Trusted advisors should take a holistic approach to their clients' needs, addressing not only investment management, estate planning, tax planning, and philanthropic goals, but also by emphasizing the “soft skills”: organizational, operational, and proactive risk management. By providing truly comprehensive services, they can demonstrate a heightened value of their firm to the next generation of clients. 

4. Emphasize a team approach: Trusted advisors should emphasize that their firm operates as a team, with multi-generational advisors and specialists working together to provide comprehensive services. Advisors should cultivate younger and more diverse team members to establish relationships with next-gen clients to build trust and confidence in the firm, and create a sense of continuity, especially as individual advisors retire or move on. 

5. Partner with ancillary service providers: Trusted advisors can’t do everything in-house. By forming strategic alliances with niche external providers, they can expand the non-investment services they offer to address their clients’ personal and organizational needs. For example, offering a solution that identifies and catalogs the tangible and digital assets clients have, that will need to ultimately be donated, bequeathed or sold, can be a significant time and money saver for next-gen heirs, reducing family arguments and preventing assets from mysteriously disappearing or falling through the cracks. 

6. Leverage technology: Most wealth management firms seem to be focused on creating a platform that is investment centric, with a client's complete wealth overview, financial goal planning, and portfolio management capabilities, while partnering for direct digital brokerage platforms, Lombard lending, and private markets capabilities.

Most recently, artificial intelligence has been in the forefront of technological advances with serious ramifications to high net worth and ultra-high net worth security. Scammers are using AI generated voice clones, faking kidnappings of family members. Having a pre-agreed-upon solution is critical to protecting the family from physical or financial security threats. As new types of threats continue to emerge, advisors need to be in the forefront of suggesting strategies to clients to combat cyber-predators. 

Trusted advisors should incorporate tools that help address soft and human issues, such as engaging with their clients' children, whether through online portals, mobile apps, or video conferencing. They should broaden their use of technology to better identify and secure all information – not just investment-focused information. By embracing technology, they can demonstrate their commitment to staying current and adapting to the changing needs of their clients.

Summary
The unfolding inter-generational transfer of wealth from Baby Boomers to their descendants presents challenges and opportunities for trusted advisors. Those who do not establish meaningful relationships with the next generation of their client families risk losing their business to other advisors who create a diversified team with specialized offerings and tools designed to provide solutions across the diverse spectrum of hard, soft and human issues, serving all demographics of their future clients.   

Footnotes
Page 1
1, https://www.cerulli.com/press-releases/cerulli-anticipates-84-trillion-in-wealth-transfers-through-2045 

2, https://www.napa-net.org/news-info/daily-news/wealth-transfers-hit-84-trillion-through-2045                   

3, https://www.cnbc.com/2019/10/21/what-the-68-trillion-great-wealth-transfer-means-for-advisors.html 

4, https://www.financial-planning.com/news/snappy-kraken-ceo-robert-sofia-on-the-science-of-smart-advisor-arketing#:~:text=Snappy%20Kraken%20officials%20also%20say,within%20the%20next%2018%20months. 

5, https://www.oliverwyman.com/our-expertise/insights/2023/jan/ten-wealth-management-trends-2023.html 

6 https://www.wealthplan.group/advisors-are-nearing-retirement-but-whos-taking-their-place/  

About the authors

Carol R Kaufman is CEO and inventor of Pinventory, LLC, a software/service company offering multiple solutions to help create home, life and business inventories to proactively plan for and more easily recover from any type of disaster or loss and to allow for the smooth transition of assets to their next owner. 

She’s also the founder/CEO of Alternatives TLC, an operational, organizational and HR consulting firm to entrepreneurs and family businesses, helping them organize their internal infrastructure.  

An entrepreneur for over 40 years, Carol specializes in public speaking, training, and finding software/service-based solutions to organizational problems. For more, visit Pinventory.com

Susan R Schoenfeld, JD, LL.M. (Taxation), CPA, MBA, is CEO and founder of Wealth Legacy Advisors LLC. She is an award-winning Thought Leader to families of wealth, and Public Speaker to the financial services industry who serve them

Based in NYC, she is a “recovering” Attorney and CPA, and “one of the few women on the national speaking circuit who is guiding financial services firms and their clients to connect with the human side of the client relationship.” – Family Wealth Report Awards 2020. For more, visit SusanSchoenfeld.com and WLALLC.com.