This is the same article I put out every year in November as the holidays approach. Every year I sit down to rewrite it and I don’t, as I am reminded that not everything needs to change. That’s because the one thing that never changes is that the business of financial advice starts and ends with trusting relationships. Someone once told me, “Nobody cares how much you know until they know how much you care.” Let’s start with some numbers. According to a July 2019 JD Power study, the average age of a financial advisor is now 55 years, which provides an unprecedented experience advantage for their senior clients. According to data from global consulting firm Simon-Kucher & Partners, the average age of wealth management clients now stands at 64. The estimates of intergenerational wealth transfer vary depending on the timeframe, but everyone agrees that the number is huge. Recent estimates state that over the next 10 years over $60 trillion in financial assets are expected to pass from the Baby Boomers to their Generation X and Millennial children. Successfully navigating this transition is of critical importance to clients and to the financial professionals who want to transition their practice to a younger generation and eventually retire themselves.
There is nothing in our business as personal and potentially complicated as planning for an aging client. However, the current makeup of the advisory industry may be exactly where it needs to be. There are a host of considerations and a huge premium on experienced advisors who in many cases have dealt personally with many of these demographic challenges. From an advisor’s perspective, there are two challenges that the industry must rise to. The first is that people are living longer in retirement and this huge wealth transfer is going to be more of a drip than a deluge. As Boomers age, their children will play a bigger role in their care and their financial lives and not simply generational inheritors of wealth. The second problem is that most advisors are not doing what is necessary to get to know the next generation. As a result, the advisors are becoming less involved in the child-parent financial conversation. Estimates range from 65% to as high as 97% of children inheriting assets leave their parent’s financial advisor. All the work advisors are doing to help clients plan their entire financial lives may simply end with the death of the primary client.
This is where the experience advantage can really pay off. One of the most important attributes for a financial advisor is their holistic family practice value proposition. Regardless of the generation, wealth management clients want to work with advisors that understand their priorities and can help them reach generational family goals. Getting this across to the next generation is critical to success in the advisory space and the holiday season is an excellent opportunity to do just that. Use these holidays to get to know people in times of warmth and celebration. As the holidays roll around, many advisors say that business gets slow from Thanksgiving through the New Year. We think this period is the best opportunity advisors will have all year long. It’s a great opportunity to make that emotional connection between the plan and the people who served as motivation for the plan in the first place.
The holidays are a time when family and friends tend to congregate at the family home. Your clients get to see those children, grandchildren, and relatives who travel in from around the country. In some cases, they are cooped up for the week or more with not much else to do except enjoy family and friends. What an opportunity to call on clients and offer to take them and their kids for a holiday lunch or breakfast. This is certainly not the time to pull out the financial plan, but what a time to get to know the extended family of your best clients with whom you have built a warm and trusting relationship. After years of hearing prideful stories about the kids and grandkids, it’s about time you got to meet them.
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