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This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).
When new prospects come into Chicago planning firm RMB Capital Management, a team is assigned right away to review family issues, such as estate planning and life insurance.
That's because generational wealth-transfer issues are so critical for both clients and advisors that advisors should begin such discussions early, says CEO Richard Burridge.
"I start the process before [people] even become a client," says Burridge, who says he's been heavily focused on the issue since the mid-1990s.
Ultimately, he says, his staff may work closely with the family's attorneys and accountants when necessary. "I don't think many firms are willing to invest the 30 to 40 man hours while that person is still a prospect," he says.
Strategy Needed
Perhaps they should be. More than half of advisors polled (55%) for the annual Ernst & Young 2014 Wealth Management survey identified the intergenerational shift as one of the most important trends they face in driving future business growth—yet almost as many (48%) also indicated that the wealth transfer represents the greatest risk they face.
The study, released last week, surveyed advisors who work with clients ranging from $250,000 to above $25 million.
"It has been a top-of-mind issue across the industry for a couple years," says Juan Carlos Lopez, executive director for wealth management at Ernst & Young, who co-authored the report with Nalika Nanayakkara.
Connecting with Heirs
At Summit Wealth Group in Scottsdale, Arizona, CEO Randy Morris says he began stepping up his focus on generational wealth transfers nine years ago.
His firm organizes client events such as baseball games, museum trips, or golf outings, encouraging clients to bring their children so that the firm can get to know clients' heirs in an informal setting. Summit also has urged clients to bring adult children to annual review meetings, where transferring wealth can be discussed more formally.
"In more recent years, we have been more cognizant about connecting with the next generation," says Morris. "A large part of our growth is coming from assets that are being inherited."
Tech Savvy
For Heather O'Neill, president and founder of Michigan Financial Advisors in Bloomfield Hills, the focus is slightly different. In addition to addressing wealth transfers when families first join her firm, O'Neill also has been shifting the firm's approach to appeal to younger clients.
O'Neill says this issue has been at forefront at her firm for the past five to 10 years, as many of her older clients have aged into their senior years. As a result, her firm has tried to concentrate heavily on technology that will appeal to a younger generation.
The firm has increased online access and reporting, she says; her bio page on her firm's website includes her Skype ID. "We have added more technology to service the next generation," says O'Neill. "They are looking for more online access."
—by Andrew Coen
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The information provided is for general information purposes only and is not intended to be legal, tax or investment advice. The information contained herein has been provided by sources other than Lord Abbett which are believed to be reliable; however Lord Abbett cannot guarantee the accuracy or completeness of this information.