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Practice Management

Developing a formal education program for multigenerational wealth management can help you and your firm attract and retain high-net-worth clients.

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

Many advisory firms worry about how to build connections with their clients' children, so that assets under management don't evaporate after a client's death.

John Schwan, an RIA in Aberdeen, South Dakota, has been working formally with his clients' heirs for more than 15 years—and says the program has helped his firm develop strong client relationships that cross generational lines. "The evidence is how many of our clients we have been working with who are second and third generation," he says.

Schwan began his firm's Prepared Heirs program back in 1999 after hearing from clients that their children were not properly informed about finances. In the beginning, participants were mostly existing clients; even now, Schwan says, roughly 90% of the firm’s clients will at minimum attend an initial meeting with younger family members to formulate a plan.

But over the years, the firm, which has more than $600 million in assets under management, has expanded the program to create a full-service offering for families from across the country that have a taxable estate.

Participants in this program pay a separate annual fee that can range from $2,500–50,000, depending on the scope of services chosen. Schwan said participants typically attend four workshops a year, in addition to one-on-one consultations with family members.

About two-thirds of Schwan's 36 staff members now work at least partly on the program, he says. "As I get older, I find my real passion to be in this area," says Schwan. "I really love working with the next generation."

Ahead of the Trend
Schwan seems to have been ahead of the curve in terms of setting up a formal family education program. Since the 2008–09 economic recession, an increasing number of wealth managers have focused on family education, says Amy Hart Clyne, managing director at the Family Office Exchange Knowledge Center (FOX), a network of ultra-wealthy families, family offices, and advisors that pursue best practices related to legacy and wealth management.

"Five to 10 years ago, you really wouldn't hear anything about family education," says Hart Clyne. But in the wake of the financial crisis, she says, many wealthy clients began to worry about sharp declines in assets and understood that their own investment decisions would need to be revisited going forward. The crisis "led families to realize they need to have some economic self-defense," she adds.

FOX last year released a new guide to family education, which is free for the family offices it works with and available for purchase by the general public; the group is planning further education workshops and webinars this year. Hart Clyne says the group's data show that about a third of its nearly 500 members had a budget for family education, with an average amount of $25,000.

She expects those numbers to rise steadily in 2014, adding that the majority of its 500 members have reached out about setting up formal family financial education platforms.

"We're having a little trouble keeping up with the demand," says Hart Clyne. "The need has skyrocketed."

Other firms are following suit as well. Ascent Private Capital Management, a unit of U.S. Bank that focuses on ultrahigh-net-worth clients, launched its Wealth Impact Planning Family Education program in 2012. "Our goal is to help families overcome the odds and secure a lasting legacy for generations," said Scott Winget, senior managing director for Ascent's Wealth Impact program. "We've created customized education plans for several families and are talking to many more about it currently."

Ascent's client base consists of families with more than $50 million in net worth; its family education program is customized to address individual needs, Winget says, with fees paid separately. Clients can choose from a catalog of more than 100 individual workshop topics, such as starting a new business or safeguarding assets.

Meanwhile, Schwan says other financial planners across the nation have reached out to him for guidance in setting up similar programs for clients. "I think we started a template for this type of program," he says. "You really need an infrastructure in place to do something like this.”

—by Andrew Coen 


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