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All in the family

Introducing the next generation to the value of your advice.

With files from John Stewart, Manulife Advisory Services.

When an advisor is looking for ways to build their business, bringing additional assets under management is always a key driver. But another strategy involves looking beyond your clients’ investment and insurance needs to include their extended family.

It’s expected that an unprecedented transfer of wealth – an estimated $68 trillion – will shift to a younger population by 2030.[1] For many advisors with older clients, that transfer represents an opportunity to generate significant business growth with the next generation.

Taking this information into account, it’s worthwhile to think about your current roster of clients aged 50 to 70. How many of their parents and children do you know? Expanding your services to other generations can contribute to your current business and potentially protect it against future declines. 

By the numbers

It’s wise to have a good grasp of the investment, insurance, taxation and overall estate planning tactics that families should consider, but understanding the potential barriers to financial advice is just as important. Consider the following:

  • 43 per cent of Canadians with investible assets of $500,000 or more are women[2]
  • 80 per cent of Canadian women switch advisors within a year of their husband’s death[3]
  • 36 percent of affluent Canadians say their children don’t have the financial literacy to manage an inheritance[4]
  • 66 per cent of children say they won’t deal with their parents’ advisor after receiving their inheritance[5]
  • For reliable financial information, a majority of investors first turn to the financial websites of their advisors and institutions (74 per cent of baby boomers, 64 per cent of millennials, 63 per cent of generation X and 53 per cent of generation Z)[6]
  • 30 per cent of respondents in the 2020 Broadridge Investor Survey said that their preferred communication method with advisors was email, followed by a phone call[7]

Building meaningful relationships with spouses and children is essential if you want to continue to be the trusted advisor helping to maintain the family’s assets. But many advisors aren’t building enough of these relationships. If the next generation hasn’t met their parents’ advisor, they are more likely to rely on another advisor to handle their inheritance. 

Relationship building

Getting to know your client’s children can be as simple as extending an invitation. Research finds that nearly half of advisors fail to reach out to extended family beyond the existing client.

The 2020 Broadridge survey asked recipients to complete the statement, “My financial advisor has communicated with my (children, grandchildren, heir or spouse).” Forty-four per cent of the responses claimed “none of these.” 

Keep the possible priorities of these family members in mind as you reach out. For example, some studies say women are looking for advisors who are sincere, authentic and interested in building a client relationship with someone who understands their point of view beyond finances. Many women also see investing as a means to an end – to finance a goal, such as buying a house or shifting a career path into operating a small business.[8] Millennials may be interested in debt-reduction strategies, as many still carry a heavy student debt load. They’re also digital natives, and want communication tailored to them through technology, such as text, video chat and personalized interactive information.[9]

Creating an opportunity for introductions

When it comes to client conversations that can lead to the introduction of family members, two important topics can open the door to include other people:

  1. Considerations about what happens at death from a tax point of view
  2. Account administration

These can be tough topics, but both prompt the client to think about who should be involved to carry things forward. 

You can begin the conversation by asking your clients if they know how taxation is affected upon a person’s death. Many clients will likely answer “no” or “I sort of know.” It’s rare for a client to not be interested in learning more about taxation at death, and this topic can lead directly into estate planning strategies, as well as offering the perfect opportunity for introductions to other family members. 

Refer to this article for more helpful insights on taxation and estate planning. 

Building value

Your clients have spent a lifetime building wealth, and now your knowledge and expertise can help guide the estate planning process to ensure a smooth transition to the next generation. Along the way, the value you offer will (hopefully) extend to relationships with additional family members – your client’s children, grandchildren, heir or spouse – building value for your business now and for years to come. 

To read more about client referrals, check out these articles:

Finances and the female factor

Stand above the crowd 

[1] https://blog.coldwellbankerluxury.com/wp-content/uploads/2019/10/CBGL-Millennial-Report_SEP19_FINAL-4a.1-1-1.pdf

[2] Tim Querengesser, “The Confidence Gap: Why aren’t there more women investors?”, February 10, 2014.

[3] Ibid.

[4] https://environics.ca/study-release/environics-research-survey-shows-affluent-canadians-are-worried-about-wealth-transfer

[5] www.investmentnews.com/the-great-wealth-transfer-is-coming-putting-advisers-at-risk-63303

[6] https://www.broadridge.com/_assets/pdf/broadridge-investor-survey-2020.pdf

[7] Ibid.

[8] https://www.academia.edu/12142219/Why_Women_Leave_Their_Financial_Advisors

[9] https://thefinancialbrand.com/92894/digital-banking-branches-mobile-advice-millennial 

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