If you work with high net worth clients, you’re hopefully thinking ahead about how to retain those assets when their children eventually inherit. If you’re not, you should be. You’ve probably seen this statistic thrown around: 90-95% of heirs will choose another advisor after inheriting wealth.
Think about what that represents: lost revenue, lost time replacing the client, and the expense of replacing that relationship. Building relationships with the next generation now will help improve your chances of keeping those assets when they transition. If you’re not actively engaging with your clients’ children, grandchildren, or heirs, you’re losing the opportunity to provide excellent advice across generations.
Here are some ways that you can engage and connect with your clients’ children:
1. Seek to Understand Their Perspective
It’s critical to treat these prospective heirs as individuals in their own right, not just vehicles for their parents’ assets. You’ll want to go through the entire discovery process with them to understand their circumstances, priorities, and future objectives. It’s very likely that they have different dreams than their parents; you’ll turn them off by assuming otherwise.
Once you know them better, ask yourself: Do these individuals fit your vision for the future? If they have assets elsewhere, are you willing to bring them onboard as a client, even if they don’t meet your asset minimums? Carefully consider the worth of the relationship and the future direction of your practice.
If you’re not sure that these clients are a good fit for you and your personality, consider assigning them to someone else in your firm. If your clients’ children haven’t inherited wealth yet or are in the early stages of their careers, they probably don’t have enough investible assets to make them profitable clients yet. You will need to weigh their future potential against the cost to maintain the relationship.
2. Host Family Events
We’re big believers in the value of client events in helping you deepen your relationships with your most important clients. Family events are a great way to get to know multiple generations of a family and show that you care about what matters most. Here are a few ideas that have worked for clients in the past:
- Movie screening: Rent out a local theater on a Saturday morning and screen a family-friendly movie. Offer popcorn and giveaways for the children.
- Seasonal event: Create an event that fits the season, like a summer picnic, fall hayride, or a winter outing.
- College care packages: Help parents and grandparents create and send care packages to their college-age children and grandchildren.
- Family portrait sessions: Bring in a photographer on the day after Thanksgiving or another major holiday and offer family portraits. You can use this opportunity to collect contact information for younger family members to mail photos later.
3. Offer Education & Mentorship
The old “shirtsleeves to shirtsleeves in three generations” saw exists for a reason. Statistics on financial literacy among scions of the wealthy are shocking: A 2013 U.S. Trust survey of wealthy families found that one-fifth of wealthy parents don’t think their children will be mature enough to handle family wealth until they are 40 or over. While 88% believe their children could benefit from talking to a financial professional, only 16% of parents have actually provided (or plan to provide) financial education to their children.
One of the best gifts your affluent clients can give their kids is the financial training they need to live with and responsibly manage wealth. Children who are raised to be financially literate are less likely to be taken advantage of, more likely to manage their wealth wisely, and better able to think critically about their financial affairs. As a financial advisor, you’re uniquely positioned to help your clients’ children develop the wealth management skills they need.
Consider reaching out to your clients offering the following:
- Financial education seminars: A series of seminars designed to teach parents how to talk to their children about money. Also consider developing seminars directly targeting their heirs.
- Bootcamps for wealthy children: Intensive sessions that bring together groups of wealthy kids to foster relationships while teaching valuable skills.
- Custom education plans: A number of advisors have seen the opportunity in financial education and work with their clients to develop custom mentorship and financial training for their children.
The Bottom Line
Failing to connect with the next generation of wealthy investors could lead to the erosion of some of your most valuable relationships. Advisors who take the time to really get to know their wealthy clients’ children and grandchildren have a much better chance to retain assets when they transition from one generation to the next.