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The Great Wealth Transfer: Will You Be Left Behind?

StratiFi Technologies Inc

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It may be the closest thing to a blind side that financial advisors will ever experience. The theme is becoming more commonplace: The husband of a couple you’ve worked with for 10 years dies suddenly from a heart attack. Within a few weeks, you receive an order to transfer the couple’s $10 million portfolio to another financial advisor – blindsided by the couple’s son. Unfortunately, this experience with the transfer of assets from one generation to the next is likely to be repeated more often than not over the next 30 years.

The largest transfer of wealth in history is underway, with $30 trillion passing from baby boomers to Generation X and millennials. And, financial advisors could either be looking at an unprecedented opportunity or facing the greatest threat to their survival. The last major transfer of wealth – from the Greatest Generation to the baby boomers – had its challenges. But this time around, advisors are facing an entirely new set of issues – the most challenging being that Gen X and millennial investors have a vastly different view of investing and aren’t the least bit shy about abandoning the relationships and strategies established by their parents.

According to Investment News, 66% of children fire their parents’ financial advisor following an inheritance. A J.D. Power study revealed that 55% of assets held by investors are at risk of leaving their current advisor upon transfer. That doesn’t bode well for financial advisors who are ill-equipped to connect with clients who are technologically savvy and expect a very different service experience than their parents. Retaining clients spanning multiple generations has always been a challenge.

Here are four imperatives for advisors who want to attract the assets of the next generation:

Start the wealth transfer conversation early.

Advisors can enhance their value as the family’s trusted advisor is by helping clients prepare for the difficult decisions that typically impact families across generations. Advisors need to encourage their clients to include family members in wealth transfer conversations well before they are triggered by a life event. Given that 70% of family wealth disappears by the end of the second generation, and 90% by the end of the third, advisors can provide critical guidance in helping heirs to be better stewards of their family’s wealth than past generations.

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Support changing communication preferences.

Gen X and millennial investors are anchored in technologically-driven mores that must be fully understood and embraced by advisors who hope to gain their favor and trust. Advisors need to adopt the latest customer relationship management systems (CRM) that enables them to determine preferred communication methods to ensure they are connecting in a way preferred by the client. Advisors also need to have an effective online presence that demonstrates their ability and willingness to communicate with these digital natives through social media and other forms of digital interaction – or risk irrelevance.

Use the right tools.

To develop relationships with younger investors, advisors need to update their offerings to include robo-advising tools and other forms of digital advice that can keep them engaged. Seventy percent of millennials prefer to interact digitally through their mobile devices. Advisors can demonstrate their technological savvy by helping their clients’ children set up IRAs or college savings plans using mobile applications to manage them.

Human engagement is still important.

Effective communication is paramount to making millennials feel heard. Despite their preference for digital interaction, millennials still value human engagement when it comes to managing their finances. What they don’t want is a sales pitch. When they sense they are receiving genuine, authentic advice that is in their best interest, they will begin to trust the relationship.

Akhil Lodha Author
Co-founder & CEO StratiFi Technologies

Building the industry standard for understanding portfolio risk through cutting-edge technology at StratiFi.

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