Forging a Path to your Client's Next Generation

By Eric Kinaitis

A recent edition of the J.D. Power Full Service Investor Satisfaction Study uncovered some uncomfortable facts: 58% of advisor clients have never been asked by their advisor about their wealth transfer plans or how they want to transfer their assets to their next generation. However, 71% of advisor clients indicated a willingness to have such a conversation with their advisor.

Why the disconnect? Apparently awkwardness is to blame. Mike Foy, director of the wealth management practice at J.D. Power states,” Talking to clients about their beneficiaries may feel awkward to many advisors, but most investors want their wealth to benefit the next generation. Many times, investors themselves struggle in money-related conversations with their kids, and an advisor is in a unique position to be a bridge between generations. Firms that can effectively train and support their advisors in this regard have a real opportunity to differentiate their services.”

Failing to engage with current clients on how they want to transfer their wealth to the next generation of family is only one disconnect the study found. Intragenerational wealth transfer is another stumbling block; the survey determined that 23% of advisor clients indicated that their advisor never interacts with their spouse/partner.

By recognizing that no client is immortal and that the median age of a full service investor is 61, it is imperative that financial advisors make inroads to the spouse/partner and heirs of their clients. Failure to do so puts the future AUM levels of their firm at risk.

How to Start the Conversation?

The concepts of family estate planning and charitable planning are a good start. Those topics provide guidance to an advisor on how to overcome the awkwardness of starting the conversation. Both topics help nail down the interests of their client and how to help them plan for the day when their wealth must transfer to support their loved ones as well as ensuring that a charitable legacy they began in life continues into the future.

Donor advised funds (DAFs) have become a proven tool in helping both clients and their trusted advisors manage this process. DAFs not only work well with other types of charitable strategies but can also help provide a host of tax savings.

Additionally, donor advised funds become an alternative to the traditional means of making cash donations on an after-tax basis that many donors normally do now to their favorite causes.

Contact or call us at 1-888-660-4508 and let us discuss how American Endowment Foundation and donor advised funds can play a role in helping your business better understand the wealth transfer needs of your clients.