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How to Add Value -- and Keep Clients -- During Intergenerational Wealth Transfers

By Crucial Clips     April 3, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FAIQ Investment Advisor Forum, Feb. 11, 2019 

GARRETT KEYES, REPORTER, FINANCIAL ADVISOR IQ: Hello. My name's Garrett Keyes. I'm a reporter for Financial Advisor IQ. I'm here today at the Investments and Wealth Institute Conference in New York City with George Walper, president of Spectrem Group. So George, could you tell me, what do advisors think they need to do to help wealthy clients with intergenerational wealth transfer process?

GEORGE WALPER, PRESIDENT, SPECTREM GROUP: Sure. So at Spectrem Group, we spend all of our time and effort every month talking to wealthy investors about topics like this. What do they want from their financial advisor? How do they want their financial advisor to help them plan for a wealth transfer?

And there's really two parts of that. One is a number of folks, consumers are inheriting wealth. Even baby boomers, younger baby boomers are still inheriting wealth. But quite often, the real money in this country is transferring to Generation X and millennials. So we spend time talking to all these wealthy consumers about exactly that question.

One of the interesting factors is that for many years, the industry was talking about wealth transfer and the trillions of dollars that would transfer. We actually are seeing it now. We haven't seen it a whole lot the last 15 years, but we're seeing it in a pretty significant way.

And one of the questions we ask is to all age groups, so what's the major source of your wealth? And people talk about hard work. They talk about work, going to school, et cetera. Doctors will talk about education. But now we're seeing a significant percentage say inheritance.

So the key becomes sort of two factors. One, advisors understanding their clients at all different ages. So let's say baby boomers and how well they know the baby boomers' children, because these baby boomers will be passing this wealth on to millennials and Gen X. And at the moment, millennials are at a point where they're creating their own wealth strategies. So the biggest strategy is, how do I get to meet these children of my clients? And that's an element.

Then the next part is, where do investment managers spend their time talking with clients? Are they doing financial planning? Are they doing wealth transfer planning? Are they doing investment management? And most clients want their advisors to, of course, manage money if it's an investor relationship versus financial planning only.

But most investors also want their advisors to do financial planning, wealth transfer. And that's where they want their advisors to spend most of their time. And that's the key, which is advisors need to focus on those skills and time with clients so that they're helping their clients plan for the money if they inherit it, or also plan for it as they pass on to the next generation.

GARRETT KEYES: So is there a notion among advisors then? Do they not know that that's what they need to spend their time on? Are a lot of advisors trying to kind of bridge this intergenerational gap in an incorrect manner or choosing the wrong methods?

GEORGE WALPER: Well, it's not an incorrect manner, and there's no right or wrong. But it, again, depends on what [is] the nature of the practice of the advisor. So here we are at this Institute for two days, and the word investment is the lead word, right? And most advisors are very comfortable in the investment world, so that is what they tend to want to talk to clients about. And when there's a lot of volatility in the markets, as we've seen this year and the end of last year, that's natural.

But clients have an element that says, I've hired the advisor to be the expert. What they really need help with and want to spend time with that advisor in addition to investing is talking to them about this financial planning, about wealth transfer, about estate planning.

But more importantly, there's this disconnect we see between investors and advisors as to when they should want to meet the children of clients. Most children of clients want to meet the advisor when they're 18 to 25 years old. And that has to be a strategy with the advisors to get to know them.

And then as a family, they can help with wealth transfer planning, even if it's a 15-year experience. It can't be done two years before the event. I mean, that's way too late, obviously. So it becomes this balance between investment management and financial planning, estate planning, wealth transfer planning.

GARRETT KEYES: So as an advisor, if you haven't really been focusing on any of these aspects, how do you go about beginning this process? Or how do you meet with their children, and how do you kind of start this whole process?

GEORGE WALPER: Well, one big factor is if you're not comfortable with some of these non-investment categories or services, obviously, partner with a financial planner or partner with an estate planning attorney. But more importantly, go out of your way to ask your clients to meet their children.

We always advise folks, as an example, when children are generally juniors in high school and might be younger now going forward, that's when they need help understanding what a credit card is, a debit card, privacy when it comes to their financial accounts, going away to college, not losing all these things their first week at school. But the point is, advisors can help parents with that. And it's a very natural time to meet children. Same with graduating from college.

You know, we talk a lot in this country about millennials. I mean, the media covers millennials like it's this new thing that just occurred. But they're 24 to, I think, 37 or 36 years old. They're at key points in their financial earnings life. And at that point, they're working with an advisor already, so they may have missed their parents' advisor relationship.

So when it comes time for the advisor to help the parents plan the transfer, they may be losing the money. So it becomes this long cycle that advisors had to be very connected with the family.

GARRETT KEYES: Thanks for speaking with me today, George.

GEORGE WALPER: Thank you. Nice to see you.

GARRETT KEYES: Nice to see you as well.