A growing breed of financial advisors is working with the children of wealthy clients to help them avoid the pitfalls that often come with inheriting a fortune.
Some firms are hiring advisors who might be retained by clients to focus on their heirs – or by the heirs themselves. Firms that offer the niche service also increase the likelihood of managing – and preserving – the family's assets for another generation.
Targeting the wealthy's progeny could be lucrative. Baby boomers will leave more than an estimated $30 trillion to younger generations over the next 30 years, according to a study by financial services firm Pershing LLC.
Advising clients' kids is not always easy: they often need more education about budgeting and investments than older clients, and tend to communicate during irregular hours.
Five years ago, advisor Jeff Seavey at SunTrust Private Wealth Management, part of SunTrust Banks Inc, began schooling a younger advisor to work with clients' children.
The advisor, Mary Lowell Downing, now 28, has brought in 15 new high net worth clients in the last three years thanks to her appeal to members of the younger generation. She now works with about 40 percent of the firm's clients, Seavey said.
Downing said she frequently gets late-night emails from clients with links to house listings on real estate website Zillow.com and the questions, "Do you like this?" and "Can I afford it?" – a sign of fellow millenials' comfort with her.
Downing's clients are often preparing for major firsts, such as a child or house.
By working with Seavey, Downing has a full understanding of her clients and their parents' financial picture.
"[G]enerations think differently about values and lifestyles," Downing said. "The way I communicate is to try to frame everything within the overall family legacy."
Similarly, at Wells Fargo & Co's ultra-high net worth branch, Abbott Downing, a dedicated practice helps clients navigate complex, long-term, family financial dilemmas. The Family Dynamics and Education group last year worked with 25 percent of Abbott Downing clients, a figure the team expects to grow this year, said its head Arne Boudewyn.
But sometimes, the near-term is more critical.
For example, Reid Hartsfield, a BB&T Wealth Management financial planner in Jacksonville, Florida, had his hands full when advising a client's son, who couldn't account for more than $179,000 in expenses from his multi-million dollar budget.
Hartsfield, who frequently helps his wealthy clients' children, examined six months of checking account statements and credit card bills. He advised the son to put money in several separate checking accounts, one for each bill. By managing his money in separate baskets, the son had a clearer understanding of how much money he had left for personal expenses.
Clients appreciate the help because for their kids, inheriting may feel like winning the lottery.
"The percentage of lottery winners who are broke after five years is staggering," Hartsfield said. "Parents don't want their kids to be that statistic."
