A huge wave of wealth transfers is expected in the coming years and financial advisors who prepare for it will be most successful.
The Institute for Preparing Heirs was created to focus on the transfer of trillions in dollars of wealth that will be inherited by the next generation, and the issues that will come along with it.
“With the tax laws that are out there now, a good part of the wealth transfer will happen while the parents are alive,” Diane Doolin, a senior vice president of wealth management at Morgan Stanley Wealth Management and a founding director of the Institute for Preparing Heirs, said at one of the institute’s recent conferences.
Creating Opportunities
Because family dynamics can get in the way of family harmony, wealth transfers are often unsuccessful. Doolin spoke about the need for advisors to help with family planning to overcome such obstacles.
Transfer issues are a vital issue to members of the older generation, who have accumulated significant wealth over their lifetimes. “Typically, parents in their 60s and older are most concerned about preparing for a smooth and successful transfer of wealth to their children,” she said. “Clients want solutions.”
Some clients decide to let the children learn how to deal with new wealth after they’ve passed away, she said. However, the larger majority of those with significant wealth want to leave a valuable legacy with their children—they just need help getting the conversation started.
Advisor Benefits
Advisors who get a head start on planning for the large wealth transfer by providing services that go beyond just investment advice will yield numerous benefits for their practices:
1. Differentiation: Advisors will have something substantial in their value proposition that competitors do not—a competitive advantage.
2. Network expansion: Partnering with other professionals to help clients as a team will lead to more potential business for all involved.
3. Better relationships and more of them: Advisors will build trust with their clients by touching on the issues that matter most to them. This will lead to high client satisfaction, strong client retention, retention of multiple family generations and more client referrals.
Professionals who can help advisors deliver these services include accountants, estate planning attorneys, trust officers, bankers, family business consultants, insurance specialists and philanthropy advisors, according to the institute.
Charities To The Rescue
“Philanthropy is a way to bridge generations. It is an important pathway to preparing heirs,” said Susan Winer, senior vice president and co-founder of Strategic Philanthropy Ltd.
Almost four out of five of U.S. high-net-worth individuals are dissatisfied with philanthropic guidance from their advisors, she said.
Advisors that are not having conversations with their clients about philanthropy should consider doing so. “It is wonderful to use philanthropy to start a family discussion,” Winer said.
Involving children and other family heirs in philanthropic decisions can also help them understand the value of money, she said. It will also encourage the younger generation to become more aligned with the family’s values.
Getting Started
A good conversation starting point is to tell your clients the risks about doing nothing, Doolin said.
“If your first conversation with your clients’ kids is, ‘Sorry for your loss,’ it is too late,” Doolin said.
Mike Byrnes is a national speaker and owner of Byrnes Consulting, LLC. His firm provides consulting services to help advisors become even more successful. Need help with business planning, marketing strategy, business development, client service and management effectiveness? Read more at ByrnesConsulting.com and follow @ByrnesConsultin.
