You’ve heard “Use it or lose it.” Well, when it comes to you clients’ kids, it’s “Know them or lose them.”
That means, you need to get to know them well—before the clients pass away and their money transfers to the next generation, according to financial advisors and firm executives who handle this issue on a frequent basis.
“We deal with this all the time,” Alex Magid, vice president and senior trust officer at Univest Bank & Trust Co., based in Souderton, Pa., which partners with Girard, the Univest Wealth Division, on trust and estate planning. “The key is to show the children of the client the value that you have provided for their parents or grandparents.
“It is true, this is a business, but it is based on a personal relationship. It is not just a transactional buy-sell situation. An advisor needs to get involved with the client’s children early on,” Magid said in an interview.
According to a recent study by Cerulli Associates, just 19% of affluent investors use the same advisory firm as their parents. However, younger investors are more likely to work with their parents’ advisors than older ones, with 41% of those under 30 retaining their parents’ advisors compared to 19% of all ages. “Advisors must engage heirs early and understand their distinct priorities to retain assets within families,” Cerulli said.
Magid would put the number of lost clients even higher.
“It’s no secret advisors have difficulty retaining family accounts after their primary client contact passes away. In fact, according to our experience, 98% of children fire their parent’s financial professional following the death of a parent, and 70% of widows switch financial professionals within one year of losing their spouse,” he said.
The relationship with the succeeding generation needs to be put in place as early as possible.
“If you wait until the death of the original client or clients, then you have lost the battle” to retain the children as clients, Doug Sherry, president Arden Trust Company, based in Wilmington, Del., said in an interview.
“In many cases the husband drives the financial conversation, but as an advisor you have to make sure you are also addressing the wife and the children,” he said.