Studies show that the majority of next-generation family members are leaving their parents’ financial advisors after receiving an inheritance. Some reports suggest about 70%, while other studies go up to 80% or more, and a lack of modern products and services may be the cause.

This is, obviously, of major concern to advisors and firms, especially as the so-called “Great Wealth Transfer” gets into full swing. Cerulli estimates that $124 trillion will go to the next generation through 2048. Millennials stand to inherit the most from Baby Boomers (and older), with Gen Z not far behind. However, Gen X will have a more immediate influx of assets over the next decade.

The message is clear – if advisors and firms want to retain those clients, they must prioritize family planning before the transfer happens. There are solid strategies for doing this, and philanthropy is at the center of them. By involving the next generation in the family’s charitable planning through the use of donor-advised funds (DAFs), advisors can forge stronger relationships with those who will soon inherit wealth.

Four Reasons Why Next-Generation Clients Leave the Family’s Advisor

There will always be personal reasons why an individual might decide to end their relationship with their parent or elder’s financial advisor after receiving an inheritance. However, because it’s so common, there are some trends that have emerged that may provide some insight as to why, including:

  1. The Advisor Does Not Have a Relationship With the Heirs – Incumbent advisors often focus on building relationships with the parents, neglecting to build a strong bond with their children. As a result, the heirs don’t feel much loyalty to those advisors.
  2. The Advisor Focuses on High-Value Clients – As advisors age, they tend to prioritize their highest-value clients, leaving the next generation unengaged.
  3. The Next Generation Has Different Needs & Expectations – Younger heirs might have different financial goals, communication preferences, investment strategies, or philanthropic goals from their parents, which the advisor may not address.
  4. There Are Succession Planning Gaps – Many firms and advisors struggle with effective succession planning, leading to delays in transferring wealth, which can frustrate the next generation.

The common denominator here – advisors are often failing to engage and build relationships with the next generation of clients. They’re not meeting them where they are, whether they are Gen X, Millennials, or Gen Z. When the time comes for a transfer of wealth or leadership, that lack of bond leads the next generation to find advisors who are more in line with their needs and interests.

How DAFs Can Help Get Next-Generation Donors Involved

A DAF is a charitable giving vehicle that offers tax benefits and simplifies philanthropy. But more than that, a DAF can help clients leave a charitable legacy – one that their heirs can continue and expand upon. Engaging the next generations through family planning with a DAF at the center can help cultivate a philanthropic legacy that connects them all through shared values.

1. Involving the Entire Family Early & Consistently

  • Family discussions – Initiate charitable planning conversations as soon as possible, and encourage younger generations to participate in decisions alongside their parents or grandparents.
  • Joint or Secondary Advisors – Appoint next-generation family members as joint or secondary advisors to the DAF, allowing them to recommend grants and potentially assume advisory privileges upon the initial donor’s passing.
  • Successor Advisors – Designate individual successors to manage the DAF or establish a new DAF account funded with the initial DAF’s assets for heirs to oversee, ensuring the continuation of charitable giving for future generations.

2. Emphasizing Shared Values & Charitable Impact

  • Focus on Impact – Highlight the real-world impact of the DAF’s grants and show how these contributions align with the family’s shared values and passions. Millennials and Gen Z tend to prefer a more hands-on approach to charity and want to see the effects of their giving.
  • Utilize Storytelling – Compelling stories can illustrate the positive changes that result from the DAF’s grants, creating an emotional connection and reinforcing the importance of continued giving.
  • Engage the Community – Involve the next generations in community events, volunteer opportunities, or other activities related to the DAF’s mission, strengthening their connection to the causes it supports.

3. Adapting to Generational Differences & Preferences

  • Communication Styles – Advisors must understand that younger generations may have different communication preferences, favoring digital platforms and social media.
  • Technology Integration – Likewise, technology can streamline engagement with social media, email newsletters, and other digital tools that keep the next generations informed and involved.
  • Customized Experiences – Tailor opportunities to the interests and motivations of younger donors, such as hosting interactive events, providing volunteer opportunities, and soliciting their feedback and input on grants. Millennials and Gen Z tend to prefer holistic approaches to wealth management, with services that go beyond investment and donation suggestions.

4. Leveraging Cultural Identity & Heritage

  • Explore Identity – Recognize the identity and heritage of clients, especially second-generation immigrants who may prefer to connect their philanthropy to their communities of origin.
  • Offer Culturally Tailored Services – Consider offering culturally competent services and programs that resonate with the values and traditions of a client’s community, building trust and engagement.
  • Language Support – Clients who are non-native English speakers may benefit from interpretation and translation services to ensure effective communication and participation.

5. Fostering a Sense of Responsibility

  • Involve All Generations in Decision Making – Make next-generation donors active participants in the decision-making process, empowering them to actively shape the DAF’s giving strategies and priorities.
  • Offer Leadership Opportunities – Engage and empower younger generations to serve on advisory boards or committees, strengthening their engagement and fostering a sense of ownership.

With the strategies, advisors and DAF sponsors alike can ensure that next-generation donors become active participants in their family’s legacy of giving.

Start the Planning With American Endowment Foundation (AEF)

For advisors looking to form stronger bonds with clients and their families through a DAF as part of their charitable planning strategy, AEF is here. Our mission is to expand philanthropy, and we’d love to talk to you about how to do it. Contact us today to see how a DAF can help engage and excite the next generation of donors.