Editor’s Note: Following on from the previous article from the financial public relations firm Makovsky + Co, headquarted in New York City, on designing a wealth transfer communications program, below is an article on developing a strategy for each client type.
To take advantage of the great migration of wealth from the Baby Boomer generation, advisors need to develop integrated communications programs around wealth transfer directed at three distinct groups. These are: clients who will transfer the wealth, heirs to current clients, and potential clients who are heirs of wealth transfers. Having a distinct strategy to address each of these key audiences is essential. Below, strategies for clients standing to inherit and transfer wealth are discussed.
For clients transferring wealth
During the wealth accumulation and distribution phase of your client relationship, advisors are crystal clear in making recommendations to their clients and letting them know the services they can provide. As clients move to the wealth transfer phase, advisors need to make sure that their intergenerational wealth planning services are prominently featured as well. In fact, sophisticated clients view family wealth planning as an essential service, and welcome the engagement of children.
For sophisticated advisors, it means developing consistent, step-by-step communications that illustrate how you advise clients about wealth transfer. In short, don’t assume that your clients know that this is part of your offering: show them. Clearly, death is a topic one doesn’t launch into easily and should be broached at the right time by a trusted advisor. An advisor can do a great deal of good by offering to help facilitate the transfer of wealth discussion among family members.
For best results, the initial communications about wealth transfer should begin many years before it needs to be executed. Effective wealth transfer requires individualized portfolio construction, tax planning and family considerations at a minimum. The effective advisor will be positioned as the “master advisor,” similar to a master contractor, leading and coordinating the expertise of others, if he or she doesn’t possess it. It takes time to communicate the delicate issues surrounding wealth transfer, and your clients will need to know from you that you have this network.
Family issues and dynamics are almost always involved in wealth transfer. Even when family issues are complicated, clients usually want solutions, despite what they may say or even believe personally. This unarticulated need may be especially acute if the estate involves a family business. In these circumstances, some advisors shy away from family issues because of the fear of intruding or feeling unqualified to address them.
Avoiding nettlesome family issues isn’t an option for the complete advisor. Engaging the family and its dynamics remains an important aspect of responsible financial planning. Gentle persuasion, steadily applied, is often the key to enlarging the circle of relationships.
Leading advisors build deeper relationships with their clients. They go beyond financial matters and recognize the emotional issues of retirement and the psychology of aging. Clients may differ in opinion on wealth transfer issues depending upon when they were born and the differences between men and women when it comes to money issues.
Be sure to ask the same wealth transfer questions to a husband and wife separately and then compare the answers. An advisor’s role will be to help the couple reach a common ground.
For the heirs-to-be
To develop an effective wealth transfer practice, advisors need to communicate directly to the second generation. It’s important to treat them simply as younger clients or prospects - not as children. Regardless of their sophistication, it’s equally important that the heirs understand what you can do for them.
Heirs may mistrust their parents’ advisors, particularly if they have already established relationships with their own financial counsel. If they are younger or less experienced, they may have a limited understanding of finance or impractical attitudes about money.
At the outset, advisors should carefully solicit the views of the senior generation regarding the family’s lay of the land. This perspective usually provides a good starting point, and provides clients the appearance of control, which can be essential.
Whatever the goal of the second-generation meeting – be it to solicit information or transmit estate decisions – advisors at some point need to meet in an “executive session” with children, without the client. This private meeting is crucial in vetting the concerns, fears and frustrations of the second generation – and setting the foundation for an independent relationship. If the advisors want the heirs as clients too, the heirs need to be presented with their own financial planning and management program. Like their parents, they need to know what you can do for them and know it quickly before they seek a competitor to advise them.
Like most people, heirs are most responsive when dealing with someone of their own generation. Consider assigning a generational equivalent to work with heirs, if possible.
Using newer technologies to communicate with clients is critical today and can be a big competitive advantage for advisors. In fact, a survey of millionaire investors - both young and old - showed that they were twice as likely as financial advisors to use e-mail, social media, online communities and texting for researching and managing their wealth. More than two-thirds of millionaires said they wanted their advisors to use these tools.
In dealing with the heirs of clients, it is important to avoid stereotypes. As one planner notes, don’t assume the younger generation is necessarily more risk receptive. In fact, they may be comparatively conservative – especially if the parent’s generation created the family wealth. Younger heirs may be fearful of the responsibilities of wealth, especially if they are financially ignorant. In short, each member of the younger generation should be treated as individuals, and interviewed to uncover not just standard information like investment pre-dispositions, but also emotional issues surrounding money.
Finally, it may be necessary for advisors to take a broader approach to educate heirs on the basics of investing and financial planning. In some cases, wealth managers have actually conducted university-type classes for young adult children of clients. Aside from expanding financial literacy, de-mystifying the basics of finance can bond the advisor to the next wealth-controlling generation.
There is no magic, one-size-fits-all answer to the wealth transfer challenge facing advisors. Each family is different in its own way. But at bottom, the key involves building trust on the part of all parties. Fundamentally, this task involves strategic, prudent and sensitive communications to all key audiences – a challenge that no advisor can afford to ignore.
To view the first part of this article, click here.