Financial advisors worried about their rich clients’ children taking their assets elsewhere when their parents pass shouldn’t be too concerned — but there are certain steps they should take to make sure they continue overseeing the inherited assets, according to a recent survey.
It seems that not even a majority of next-gens sack their FAs. In fact, only 28.3% of high net worth clients’ children break off the relationship with their parents’ wealth manager, according to data and analytics firm GlobalData.
But Heike van den Hoevel, senior wealth analyst for GlobalData, says in a statement that advisors shouldn’t be complacent either.
“Reaching out to the next generation early on is critical, but wealth managers are not doing a good job,” she says in a press release accompanying the report.
The most effective step advisors can take to hold on to their clients’ heirs is to involve them early on in the estate planning process, according to GlobalData’s survey of 358 wealth managers around the world, 24.2% of whom picked it as the most important factor in minimizing the likelihood of the clients’ children going elsewhere. Yet 41% of wealth managers around the world don’t provide inheritance planning directly, according to the report.
The next most important factor in retaining the next generation is encouraging the clients themselves to get the next generation involved in financial decision-making, GlobalData’s survey found. Further down the list are factors such as offering internships and other work experience at the wealth management firm, robust portfolio performance and having a young financial advisor base, according to GlobalData. Other factors that play a role, according to the wealth managers surveyed, are having a sophisticated digital presence, a brand that appeals to the younger generation, financial education of the clients’ children and hosting events aimed at them, GlobalData says.
Building relationships with the next generations sooner rather than later, adopting new technology and allocating to more socially responsible investments are just some of the ways to retain the next generation, according to Asher Cheses, a Boston-based analyst at research firm Cerulli Associates.