Will your clients’ heirs become your clients?
by David Goodsell
Mr. Goodsell is Executive Director of the Natixis Center for Investor Insight. Visit https://www.im.natixis.com/.With more than $80 trillion set to pass to a new generation of clients over the next 20 years, the Great Wealth Transfer, as it’s been called, is a genuine concern for almost every financial advisor. The pressure to maintain relationships and assets beyond client lifespans is so great that 41% of financial advisors believe that generational wealth transfer represents an existential threat to their business.
Most advisors have already made asset retention a focus, and to some degree it’s paid off. Overall, 78% of US advisors polled in the 2024 Natixis Global Survey of Financial Advisors report that they have been successful in retaining spouses after a primary account owner passes away. Even when the assets are passed on to next-generation heirs, 58% of advisors say they’ve been able to retain the assets.
Despite the positive track record, more than one in five advisors still say they’ve lost significant assets to generational attrition. Looking out 10 to 15 years, the problem could increase exponentially, as a rapidly aging population and aging client rosters have the potential to accelerate asset losses. Faced with this massive shift in capital ownership, advisors will need to redouble retention efforts and lay out clear strategies for how they will adapt their practice to meet the needs and preferences of a younger client base.
Growth Plans Start With Asset Retention
Financial advisors have generally had a good run in the 15+ years following the Global Financial Crisis. Markets have grown dramatically. Client assets have grown steadily. And advisors have seen the value of their books grow along in kind.
Most expect that streak to continue as the 300 US advisors included in the recent Natixis survey anticipate average annual assets under management growth of about 11% over the next three years. Healthy market performance may help them achieve these ambitious goals, but advisors say they’ll also need to add an average of 16 clients each year to hit their mark.
That math works only if advisors retain the assets they already have on the books. Much of that wealth could be concentrated among their oldest and most valuable clients, putting those assets at risk, and most advisors recognize the challenge that presents to their business.
This is why 66% of those surveyed say establishing relationships with their clients’ heirs is a critical success factor in growth plans, ranking only behind their ability to demonstrate value beyond asset allocation (73%). In many cases, those two issues are inextricably linked.
Retaining Assets Before The Afterlife
Clearly, it’s critical to start building long-term relationships with next-generation heirs well before wealth transfer becomes an issue. In fact, nine out of ten advisors say it’s their top strategy for retaining assets.
Advisors are presented with several entry points for these critical relationships. Overall, 85% say they are regularly discussing family wealth with their older clients. But beyond understanding how individuals view their wealth and how they want to share their legacy, many advisors are finding that the conversation needs to include clients’ heirs as well.
A $185 million broker/dealer advisor we spoke with summarized how that family conversation can evolve: “In those last few years of the client’s life, he said, “you’re actually interacting with their children quite a bit. But because we’re holistic and [we have] always done the complete financial plan, we’ve broached a lot of the difficult conversations around estate planning.”
Other times, advisors are finding the relationship entry point outside the family wealth discussion. In a separate interview, a wirehouse advisor managing $127 million for clients related how that can play out when he said, “You’ll get an older person; maybe the husband has already died off. And they’ll say, ‘Oh, my daughter is helping me with my bookkeeping.’” In these instances, he recommends making yourself available to this person as a resource to call with questions about taxes and other issues.
In his view, heirs may have heard their parents’ advisor’s name around the dinner table, but now there’s a face with the name, and a genuine one-on-one relationship gives them a sense of what it’s like to do business with you and how you respond to client needs.
Regardless of how they approach it, 87% of advisors say they are including heirs in the discussion of family wealth. This is an important practice that allows you to learn what’s important to each family member and hear directly how each one thinks about wealth and investments.
Beyond those family discussions, advisors will often take a more direct route by establishing relationships with heirs on their own. Overall, 87% of those surveyed say they are comfortable asking for an introduction to next-generation heirs.
Getting The Service Mix Right
When asked what asset retention strategies work, 55% of advisors say it’s important to go beyond investments and offer ancillary services, such as trusts, estate planning, and college planning. Each of these services puts you, as the advisor, in a long-term discussion regarding the family’s total financial plan.
But not every advisor is making the effort. Independent advisors (63%) and those at wirehouse firms (57%) are more likely to embrace this approach. Less than half of registered investment advisors (47%) do, which makes holistic planning a key point of differentiation or an opportunity to enhance competitive capabilities, depending on where you sit.
About four in ten advisors say they are also offering personal services that will help them build a direct relationship with heirs. In one example, a wirehouse advisor managing $400 million for clients told us her team offers career planning and networking services for clients’ children. Her team not only offers to help with interviewing skills but also takes the extra step of conducting research on the companies where clients’ kids are interviewing and then helping to formulate unique questions that will help these kids stand out during their interviews.
The service continues once they land a job, and her team helps clients’ children get a basic understanding of investing and offers tips on how they can take advantage of their company’s retirement plan benefits.
While offering such services is an essential step to starting the relationship early, there are benefits to this approach even if it doesn’t pan out down the road. She notes that taking the time for these simple activities demonstrates that you care about the people your clients care about, and that goes a long way toward shoring up your relationships.
Another strategy for advisors is to review who the beneficiaries are on client accounts and ask for permission to meet with them. The key insight from all these services is that it’s important to begin a relationship with heirs early. Waiting to extend these services until after the client dies is probably too late to retain the assets.
Growth In The Afterlife
Despite all the ways there are to make inroads and their record of success today, 36% of advisors are worried that their value proposition won’t appeal to clients’ next-generation heirs. But all advisors should consider the implications this holds for their practice.
Our own research with investors reveals some key considerations for advisors as they look at these younger generations. It may be surprising to know that Millennials (age 26–43) were much more likely to say they wanted financial planning services (61%) from their advisor than Gen Xers (age 44–59) (39%). Remarkably, they were just as likely to say they were interested in retirement income planning (55%) as Gen Xers (57%). They were also more likely to say they were interested in private investment opportunities (43%) than the Gen Xers (20%) and Baby Boomers (11%) in the survey.
Recognizing there may be some key differences in what next-generation heirs are interested in can make a significant impact for advisors. Simple adjustments to how you discuss your services and when you introduce them to heirs can make your value proposition more relevant to them.
This underscores the measure advisors may need to take to grow their practice over the long run. The median age of advisors in our survey was 54, which is only a few years younger than the industry rule of thumb, which says the average advisor is 58 to 60 years old. And these advisors are more likely to be pursuing prospects who are in the same age group.
Overall, 72% of advisors say they are prioritizing prosects who are in the 50 to 60 age range, while 69% appear to be looking to win retirement rollover assets by prioritizing those in the 60 to 65 age range. Of course, these are priority client segments – they’ve generally had enough time to accumulate wealth.
But it’s probably a wise idea to pay more attention to younger prospects, some of whom may not be wealthy now but stand to build their own wealth, and many may be in line to inherit their parents’ wealth. Right now, only 29% of advisors in the US say they are making those prospects in the 35 to 50 age range a priority. Looking to achieve double-digit growth goals, advisors may want to take smaller incremental growth right now in order to win more of the exponential growth coming over the next 20 years.
Success iSuccess In The Great Beyond
When it comes down to it, advisors need to face mortality. No matter how long clients’ assets have been on the books, there is no guarantee they’ll remain on the books in perpetuity. The imminent Great Wealth Transfer will only compound the problem. To retain client assets, it’s critical to engage with client heirs as early as possible and provide genuine value. The right strategy now can make looking at the afterlife a little less onerous.
