Generational Wealth Transfer: Is Your Practice Prepared?

By Eric Kinaitis

A study done by Accenture illustrates the wealth transfer that is occurring, estimating that nearly $30 trillion in financial and non-financial assets in North America will shift from the Baby Boomer generation to their heirs during the next 30-40 years.

Regardless of your exact role within the broader wealth management field, determining how to prepare for this generational shift will determine if your business can keep/capture a sizable share of these shifting assets , or if your business faces a funneling away of assets that can eventually turn into a freefall.

The study determined the average age of financial advisors in the US around 49. This indicates that for many advisors, their age and the fact they are within less than two decades of traditional retirement may indicate a lack of motivation in building bridges to the heirs of their current clients.

They simply may not see the personal incentive. This is why it becomes all the more important for the practice to engage in a policy of managing and pursuing this asset transfer beyond just the personal relationship between the advisor and their individual client.

The New and Future Market: Heirs

One of the ways discussed in the Accenture report is for a practice to build capabilities concerning family estate planning. This represents a way to utilize current clients (especially Baby Boomers) to make inroads to their families and future heirs. The more a wealth management firm can be involved in the estate planning needs of their clients, the better depth they can achieve in knowing more about:

1. the clients' total wealth beyond just their investment portfolio
2. their heirs
3. the clients’ intent as to how they want to distribute their wealth

The study quoted “that firms should make family estate planning a priority to prepare for both sides of the wealth transfer, and, in the process, become the brand of choice for the heirs.”

One way to make an inroad into the topic of family estate planning is through the field of charitable planning.  For those many advisors who may not know how to start the conversation about charitable planning, there are 10 questions that can pave the path to understanding the charitable interests of the client:

1. “Are you currently involved with any non-profit organizations? How . . . as a donor, volunteer, board member?”
2. “Do you typically support the same charities every year or do you vary your support from year to year?”
3. “How do you decide which charities you support?”
4. “Who else helps you decide which charities to support? What role does your family play?
5. “Do you give the same amount each year? Upon what does it depend?”
6. “Which donations have you made that have provided the greatest satisfaction or regret?”
7. “Would you prefer to give anonymously or receive recognition?”
8. “What types of assets have you used when you have donated in the past? Cash, checks, appreciated stock, other non-cash assets?”
9. “Do you have any charitable vehicles in place, such as a private foundation or donor advised fund?”
10. “Do you want to donate during your lifetime, at death, or for many years after your death?”

The following ebook provides deeper understanding on how a practice can better engage current clients and their heirs concerning charitable planning.

At American Endowment Foundation, we look forward to discussing the circumstances of your firm and your clients concerning the field of charitable planning. Contact us or call at 1-888-660-4508.