Hold On! Strategies to stem the outflow of assets as they transition to the next generation

Let's face it – most advisors lose out when wealth passes down to the next generation. In fact, less than 20% of those assets stay with the same advisor after the transfer. Why? Because too many advisors fail to connect with their clients' heirs, missing the opportunity to serve the family multi-generationally. Today, we will focus on bridging that gap, building genuine connections with the next generation, and locking in that legacy.

The bottom line is that if you genuinely want to keep those assets under management and work with those clients, you must adopt a much more strategic approach to building connections with future inheritors – and start long before the wealth transitions. Yet, according to recent data:

• 75% of wealthy investors say that their advisor has never sat down and met with the client's adult children (MFS Investment Management survey)

• Only 60% of practices have a relationship with the client's spouse, with fewer than half (45%) having any relationship with their clients' adult children (Cerulli Associates)

Considering that spouses are generally the first stop on the wealth transfer journey, the importance of building intergenerational family relationships that engage all members should always start with the spouse (if they're not already an active participant in financial decision-making), but reaching out and building connections and trust with the next generation isn't something you can put off any longer.

It's important to understand, however, that these younger Gen X and Millennial inheritors typically want a very different type of relationship than the one you've established with their parents over the years – a relationship that's more planning-focused than 'investment-centric;' one that fully embraces the power of digital advice delivery; and is centered on the very different priorities and goals of these less individualistic and more community-focused future clients.

To deliver on that, however, you'll likely need to invest both time and money into a handful of critical operational upgrades, especially the following:

Service Model & Pricing Shifts

Creating a personal connection and building trust with a next-generation client takes time. Advisors cannot wait until heirs inherit wealth to start building relationships, which poses significant scalability challenges—creating plans for future inheritors requires time and effort that may be cost-prohibitive given their current wealth levels:

• Suppose your current service offering focuses more heavily on investment and portfolio management. In that case, you'll want to invest time and resources into building a more robust goals-based planning platform that can deliver cash flow planning, debt management, socially responsible (ESG), and charitable giving strategies, for example.
• Consider offering complimentary foundational financial planning to the 18-25-year-old adult children of your HNW clients (within carefully structured time parameters for cost containment) to help establish strong relationships before inheritance.
• Explore offering some sort of 'household pricing' In this structure, you can leverage the client's relationship pricing to provide a lower fee structure to the next generation before they become inheritors.
• Provide a degree of autonomy and choice by introducing next-gen inheritors to several of your firm's next-gen advisors (if you don't have enough young advisors on staff, the time to onboard them is now, before the need rather than after); allowing these younger clients to select an advisor they'll feel more comfortable building a relationship with.

Technology

For most firms, one of the most significant financial investments they'll need to make if they wish to cultivate and serve next-gen inheritors successfully will be adding and integrating newer technologies that enable the firm to better engage with the younger generation on their terms, including:

• Building out your digital information repositories, such as a family portal or online dashboard, will help keep younger clients engaged and informed about their family's wealth and investments.
• Begin establishing a more robust social media identity and presence that's both genuine and relatable.
• If any elements of your planning process are still paper-based (e.g., data gathering tools, goal definition/quantification worksheets, etc.), seek out alternatives that will enable you to deliver an end-to-end online process.
• Design individual communication plans tailored to each inheritor's preferred methods (e.g., text vs. email updates, periodic online vs. in-person meetings, etc.) to foster greater comfort, trust, and engagement.
• Set up routine check-ins with younger family members, even if just to discuss market trends, their interests, or any family financial updates that may be relevant to them.

Estate Planning & Family Philanthropy

Any service that brings together current and future clients in a shared purpose provides a tremendous opportunity for you and your team to make and strengthen personal connections, communication, and trust with the future inheritors of your client's wealth. Estate planning and family philanthropy can be incredibly engaging and productive:

• Integrate Estate Planning and Inheritance Discussions into the Advisory Relationship: Regularly bring up estate planning topics with clients and include their inheritors in discussions to normalize these conversations over time.
• Work closely with clients to create a structured game plan for wealth transfer that includes roles and responsibilities. Show them how they can precisely control the 'when' and 'how' of asset distribution over time through the active use of various trusts with third-party trustees, helping to avoid any conflict among beneficiaries.
• Encourage clients to involve the next generation in estate planning and inheritance discussions (perhaps facilitate an offsite family meeting). Explain that by setting more explicit inheritance expectations, they'll enable family members to better plan and prepare (e.g., They may choose to invest in a new business venture for their children, confident that their children's 529 Plan accounts are fully funded.).
• Encourage larger family office clients to establish an 'Inheritor Advisory Board' of next-generation members and give them an active, meaningful role in financial oversight.
• In a family setting, philanthropy can help reinforce family values and bring adult children together, working cooperatively to strengthen family bonds. Generosity is a learned behavior requiring desire, a clear strategy, trusted advice, and an ongoing commitment. Whether through a foundation, DAF, or active volunteering, it's a great way to strengthen your firm's bond with the next generation.
• Work with clients to create family legacy documents or values statements that include core values, philanthropic goals, and guiding principles that the next generation can embrace and help refine and evolve over time.

Lead by example

Lastly, suppose you seriously want to retain the next generation inheritors of your client's wealth. In that case, you need to put your money where your mouth is – documenting a crystal-clear succession plan that imbues them with confidence that your firm and team structures will be able to support their needs far into the future.

While the historical success rate may seem disheartening, watching your clients' assets walk out the door as soon as the wealth transfers are not a foredrawn conclusion. You and your team CAN stem the tide. However, it will require a willingness to invest in technology, planning resources, and revised service and pricing models, which may sting slightly in the short run.

If you or your team expect to still be in business and serving clients a decade or two from today, early engagement with the next generation is simply non-negotiable. And this existential demographic threat can quickly become an unexpected opportunity – as you build trusted relationships with inheritors who become brand ambassadors for your business with their friends and associates who are also coming into family money. It's a veritable win-win proposition.

Coaching Questions

1. What actions will you take right now to start building meaningful connections with your clients' heirs, ensuring your advisory services stay relevant across generations?
2. How will your firm's service model adapt to meet next-gen clients' evolving needs and expectations, particularly as they prioritize digital engagement, planning-focused advice, and community-centered goals?
3. What investments in technology, communication, or talent could better position your team to become a trusted advisor to both current and future generations, creating lasting family relationships?
4. What improvements can you make to your firm’s estate/legacy planning capabilities as well as your financial education offering to help begin building connections and relationships with future inheritors?

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