The Greatest Wealth Transfer: Challenges and Solutions

by | Jan 24, 2020 | Blog

Are you ready for what is being called the greatest wealth transfer in our history, the intergenerational passing of up to $68 trillion in wealth from the baby boomers to Generation X, Generation Z, and millennials over the next 25 years1? While economists continue to debate how large and impactful the wave will be, it’s coming, and financial advisors face two obstacles when it does. First, 95% of heirs do not stay with their parents’ financial advisor after they inherit wealth2, and second, 70% of those who inherit wealth will lose it by the second generation3. If you want to ride the great wave, it’s best to recognize these challenges and implement solutions now.

Why do 95% of heirs leave their parents’ financial advisor? One reason for the mass exodus is that there’s no relationship between the financial advisor and their clients’ adult children or heirs. When there isn’t a relationship, the heirs are more likely to move their newly inherited assets to someone they already know and trust. Even worse, some heirs who want to keep their parent’s financial advisors are turned away because they may not meet the advisor’s required minimum asset level. If this is a common practice of yours, it’s time to consider a policy change.

Many of your clients’ adult children may be in the wealth accumulation phase, which is why our business development consultants recommend you create a pocket in your practice that serves their needs, even if they don’t meet your minimum required asset level. By creating a service package that can help address their most common financial planning needs, such as reducing debt, saving for a home, or college education planning, it shows them you have a genuine interest in helping them build their wealth, just as you helped with their parents.

Your clients’ heirs can help you address another need – succession planning. If you are planning on retiring within the next ten years, identify a Gen X, Gen Z, or millennial advisor who is eager to serve this market and can also become your successor. As your client base grows in diversity, your practice also becomes more valuable to buyers.

If hiring a junior advisor doesn’t interest you, or is not in your current business plan, then consider including your clients’ heirs in an annual estate planning meetingProviding financial education opens the door to introductions and serves to help your clients’ heirs to preserve their inheritance. It also opens the doors for timely discussions on topics such as long-term care planning, estate planning, or investment education.

The more you learn about your clients’ adult children and other heirs, the more you will be asked to work with them. Be sure to have a solution in place that can serve their needs, no matter what it is, whether an educational or full-service offering.

For specific recommendations on how to implement these and other solutions in your practice, contact us. We have experienced business development consultants eager to help you overcome these obstacles and grow your business.


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