The concept of the “Great Wealth Transfer” has cemented itself as conventional wisdom among most financial advisors and spurred their hunt for effective strategies to bolster relationships with their high net worth clients’ heirs.

Almost all demographic forecasts show the children of baby boomers inheriting lots of money. According to an Accenture report, some $12 trillion to $30 trillion in assets and nonfinancial assets in North America will be changing hands in the next three decades.

“At its peak between 2031 and 2045, 10 percent of total wealth in the United States will be changing hands every five years,” the same report says.

But those numbers aren’t the only predictions that should concern financial advisors when they address future massive shifts in asset ownership.

There are also forecasts that show how many financial advisors risk getting dumped when those asset transfers take place. According to an InvestmentNews survey of 544 advisors conducted two years ago but still seared in most industry veterans’ brains, two-thirds of clients’ adult children fire their parents’ advisors when they inherit the assets.

To thrive, or possibly even survive, advisors must find ways to gain acceptance with clients’ heirs prior to the children getting the money.

“If an advisory has not connected before the wealth transfer, they should be worried.”
Carol Sherman
Preparing Heirs

“We realize from our practice, making sure those kids are really well taken care of, even though they don’t fit standalone the qualifications of being our clients is important for the long-term and continuity of the relationships,” says Mark Brookfield, a managing partner of the Erdmann Group within the Private Banking and Investment Group at Merrill Lynch, echoing the sentiments of almost every financial advisor who spoke for this story.

“We are experiencing historic levels of wealth being transferred. With so much money being transferred, there is so much opportunity to capture it. If an advisory has not connected before the wealth transfer, they should be worried. There’s opportunity and risk,” says Carol Sherman, managing director of the Institute of Preparing Heirs, a consulting firm that trains advisors on how to work with clients’ families.

Her consulting firm has “cracked the code,” she says, developing methods to help advisors make “meaningful connections with the next generation.” Morgan Stanley, UBS, and Merrill Lynch advisors count among her firm’s clients. “A lot of the firms — they are all talking about it,” she says. But often, “they have no tools and the firms that have created tools, they are no use unless the advisors are trained. They just sit on the shelf,” she says.

Below, our story identifies what financial advisors seeking to develop relationships with clients’ children have found worked, what failed, and what tactics they are still testing.

Strategies that work

Identifying best methods for winning the adult children of clients is essential to securing their business. And FAs suggest they have done just that by hiring younger advisors, offering specialized advice services, and extending exclusive educational and networking events to clients' children.

If you want to cement relationships with clients’ adult children, hire younger advisors on your team to work with them, says Merrill’s Brookfield.

“People have a connection when they are in the same stage in life and that trust goes a long way” in the advisor-advisee relationship, David Jeff Roberts, of Jeff Roberts & Associates, told FA-IQ.

Young people learn from each other. If you set up opportunities for them to mix with other wealthy families, this is something they can’t buy.
Arne Boudewyn
Abbot Downing

Roberts and Brookfield aren’t alone in their technique of pairing young clients with young FAs.

The Private Advisor Group, with nearly $17 billion AUM, used the same technique, and it resulted in the firm successfully establishing stronger relationships with clients' children, a firm official says.

“While Private Advisor Group’s average FA is in their mid-50s, we recognize it is important to hire talent that can resonate with the younger adult children,” a firm spokesperson says.

Providing specialized advice to the HNW clients' children is also essential to securing their business -- but the specialized advice should target specific issues clients' children may experience. For example, offering pre-nuptial advice or tips for a mid-career change are good ways to connect with the children, Arne Boudewyn, managing director at Abbot Downing, Wells Fargo’s ultra high net worth unit, who leads its Institute for Family Culture, states.

For $500 million AUM RIA Stavis & Cohen, providing specialized services means offering fund trustee training.

“Inevitably clients' children will be involuntarily given the job of managing their inheritance once their parents die,” Deborah Stavis, the firm’s CEO and cofounder, says. “They want to make good decisions with their family’s money; they just don’t understand the rules of the game,” Stavis says.

FAs are also hosting parties and events to bolster ties with clients’ children.

“Young people learn from each other,” and “if you set up opportunities for them to mix with other wealthy families, this is something they can’t buy,” Boudewyn says.

Events are particularly crucial to Stavis & Cohen’s strategies. The firm uses a combination of financial education programs, client retreats, and organized events to reach clients’ children, Stavis says.

Deborah Stavis

Stavis & Cohen University is an educational program run to teach the children of clients about their cash flows and to understand value. In it, the firm creates a budget and teaches clients' children to recognize unintentional spending, Stavis says. It has helped the firm strengthen ties with the next generation. “We will probably recruit more clients as a result of the Stavis & Cohen University's educational services. It’s a service offered exclusively to children of current clients,” she says.

Family retreats are also an intricate part of the firm’s recruitment plans, Stavis adds. “We are creating financial plans for every child that has attended a family retreat,” she says.

Family retreats create time for FAs time to bond with the children of their clients, and this helps to establish the advisement relationship, Stavis suggests. But for family retreats to work, firms must combine financial education with an understanding of the emotional quotient. Advisors learn “what drives the children of clients, how they behave, and what they want” by combining financial and emotional components, she says.

Besides educational sessions and retreats, regularly scheduled events are also important for the firm’s recruitment efforts.

“We do up to six events a year to draw the children of our current clients,” she says. Events range from a “big ideas brunch” to a “private cabaret show,” Stavis says. These events are part of the firm’s “edutainment” strategy. “Mix education and entertainment and even if the parents can’t come to an event, the kids will,” she says.

Strategies that fail

Some tactics have failed when it comes to cultivating relationships with client heirs.

“The first reaction for everybody about gaining relationships with clients’ children was, "You have to have a robo,'” Frank McAleer, Raymond James' senior vice president of wealth, retirement and portfolio solutions, recalls. But time has shown that although younger demographic groups gravitate to online tools, they also value human relationships, he says.

Advisors should also not plan on approaching every client’s heirs with the exact same tactics.

“Every family has its own nuances,” says Merrill’s Brookfield.

Complete openness is one approach Brookfield’s team has learned doesn’t work well when attempting to cultivate relationships with the children of clients. “We are not big believers in being fully transparent with the kids. We are not big proponents of opening the accounting books in front of the kids and saying, ‘This is what mom and dad have,’” he says. Instead, he encourages clients to stick with vaguer terms, such as “We are very fortunate.”

When you provide longevity planning for parents, you cannot help but get the whole family involved.
Frank McAleer
Raymond James

Some clients don’t want to even broach the subject of their assets with their children.

“If a family says they're are not ready for this, it’s not just yay or nay. A lot of relationships develop over time,” Brookfield says.

Abbot Downing’s Boudewyn also identifies another strategy that doesn’t work: disingenuous outreach.

“You have to have authentic reasons for making inquiries about the kids and grandkids,” Boudewyn says.

As a rule, advisors shouldn’t assume clients will let them meet the kids.

“Everyone should consider it a privilege or honor if they get introduced to kids or grandkids. It’s rare that you meet them and even rarer that you have authentic reasons about making inquiries about grandkids and kids. You should think about what you should be communicating” when you do have the opportunities, Boudewyn warns.

Strategies still being tested

To help bolster relationships with the next generation, Raymond James got out in front with a suite of longevity planning resources. The St. Petersburg, Fla.-based firm introduced the new resources only nine months ago and already nearly 2,000 of its clients have started using them.

Raymond James' managers don’t yet have statistics that show if the resources help advisors keep parent assets under management after they have transferred to heirs. But the managers are optimistic.

“We’ve heard a lot of great anecdotal feedback from our advisors,” McAleer says.

Raymond James began offering advisors the resources — which include a heavily-vetted roster of recommended vendors to send to clients so families (including adult children) may plan for their parents’ advancing years — in February. The list includes vendors for health care, caregiving, and transportation services.

Raymond James also provides guides for advisors to work with clients on risk management issues associated with aging, including long-term care, Medicare, and elder financial fraud protection.

“You cannot help but get the entire family involved,” including the adult children and prospective heirs, McAleer says about the parents’ longevity planning.

At Merrill Lynch, Brookfield says his team has tried gender-segregated bootcamps for financial planning lessons for clients’ younger family members.

“We are helping them become mindful,” Brookfield says.

At Abbot Downing, Boudewyn has encouraged advisors to ask the matriarchs and patriarchs of wealthy client families if advisors may interview everyone more than 18 years old “to get a sense of what’s on their mind.” He then recommends advisors make sure they listen during those interviews to the younger family members’ ideas.

“It can be powerful,” he says, because the younger generation learns the advisor “hears my voice.”