Sept 16, 2021 – The great wealth transition is coming; however, financial professionals may not be positioned to
capitalize—yet. In the U.S. alone, nearly $70 trillion will transfer to heirs and charities by 2042. Baby Boomers alone will pass about three-fourths of this amount.¹ Yet studies suggest that about 80% of heirs change financial professionals after inheriting their parents’ wealth.² Of those who switch to a new provider, about 88% never considered sticking with their parents’ financial professional.³

For financial professionals, the coming transition represents a massive challenge. Losing clients is expensive—one analysis found that it costs approximately $3,100 in marketing costs to acquire a new client. That includes some “hard” costs, like the purchase of advertising, but the bulk of it is the financial professional’s time.⁴

Yet cultivating the next generation is a clear opportunity as well. After all, for those target clients, you already have a relationship with key people in their lives. You also likely have some background information on their situation. And you can build from there.

Here are some key ways to build a relationship with the next generation of your client base.

Start Young

More than anything else, be proactive. Don’t wait until your clients’ kids have grown or are about to inherit wealth. You’ve probably already done some of the legwork. For example, some financial professionals send gifts when their clients have a new baby. Most make it a point to ask about kids at every meeting. You may not meet with kids until they’re teenagers, but you can begin supporting client parents in how they talk with their kids about financial topics—even when those kids are very young.

The Consumer Financial Protection Bureau has a site with financial milestones for kids of different ages. For example, very young children can start to understand the concept of saving, and middle-school kids can begin getting an allowance to make their own spending decisions. Teenagers can begin to have different accounts—one for saving, one for giving away, one for investing.⁵

Avoid the Hard Sell

When kids hit their teenage years, you can begin to meet with them individually—if their parents are comfortable with it. In these discussions, the most important element is listening and getting to know the kids’ interests. You’re not trying to sell them on specific asset classes. You’re really just trying to form a connection based on the person’s interests, concerns, and goals—financial or otherwise.⁶ A key way to forge relationships with teenagers is to get out of the office and meet them on their terms. For example, if a client’s kid participates in organized sports, you could attend a game. If they like an activity—like skiing or golf—you could offer to participate one afternoon. You don’t need advanced skills in those areas, just a willingness to engage with them in a part of their life that’s meaningful to them.

Capitalize on Family Meetings

You’re probably already scheduling family meetings for some clients to ensure that parents’ wishes are clear regarding their estate, or to make sure that end-of-life documents are clear. But family meetings can be a good way to initiate relationships with the adult children of your clients. When those people see that you’re providing a valued service for their parents, they’re more likely to believe you can offer them value as well.³

Offer Free Advice

It may seem counter-intuitive, but you can offer to help clients’ kids make some early financial decisions—for free. For example, if they start a new job, you can help them get their 401(k) set up. You can also offer advice about paying off student loans, saving for a first-time home purchase, or building up a cushion of savings. Some financial professionals offer no-fee advice to clients’ kids up to age 26—the same period when they can stay on their parents’ health insurance—to build a relationship and demonstrate their value.⁷

Be Flexible About Fees

Some firms—conscious of how younger people may not have significant assets or be able to afford management fees—come up with ways to work around that hurdle. For example, firms may allow families to bundle their assets to offer lower fees to kids while still giving them individual advice and support.²

Use Younger Financial Professionals on Your Staff (or hire them)

Younger people at your firm may be better equipped to connect with clients’ kids. Consider tasking one person close to that demographic to be the main point of contact. And if you can’t have someone young enough on staff, consider hiring someone specifically for the task.¹

Use Technology to Interact

Older generations typically prefer in-person meetings but many young people do not. Accordingly, you should tailor your means of communication and rely more on technology.³ In addition to showing that you can work with potential clients on their terms, technology also allows you to more easily offer instruction via webinars, social media, and other channels—and to measure the response rate from recipients.

When you consider how much time and effort many firms spend to cultivate strangers as potential clients, focusing on the next generation of current clients just makes sense. You already have some insight into them, you know that they’re likely to inherit sizable assets, and you have a position of trust with people close to them. By being systematic, you can ensure that you capitalize on those advantages.