Did you know that having a sweet tooth is genetic? Research from the University of Guelph shows that there are multiple genotypes that make someone prefer sweets. Unsurprisingly, almost 80% of preschoolers had at least one of these genotypes. As if that weren’t enough, the TAS2R38 taste-receptor gene can cause vegetables like Brussels sprouts and kale to taste bitter. People without that taste-receptor gene ate a whopping 200 more servings of vegetables each year. While traits like a sweet tooth or an aversion to certain tastes can be carried down through genetics, there’s no guarantee that every person in a family line will inherit the same genotype. Something that parents and grandparents are almost certainly passing down, though, is the family wealth. About $53T will go from baby boomers to their heirs in the next couple of decades. Will their heirs keep their parents’ financial services relationships? Current numbers aren’t encouraging.According to a 20Y study done by The Williams Group, which is based in San Clemente, CA and consults on succession issues, 70% of wealthy families lose their wealth in the second generation, and 90% are no longer wealthy by the third generation. Those who do manage to stay wealthy in the second and third generations of wealthy families don’t typically stick with the financial services professionals who served their parents and grandparents. Between 66% and 95% of heirs leave the financial advisor who previously managed those funds, often because they haven’t met or don’t have a relationship with the advisor. Heirs may also leave the bank where their inheritance was previously deposited, especially if they don’t reside within that community financial institution’s (CFI’s) footprint. That can nibble away at a CFI’s customer and deposit base.Help Customers by Helping YourselfCFIs have an opportunity to help client families preserve their wealth through the generations while also maintaining relationships with the stewards of that wealth. CFIs that offer wealth management have a head start in discussing such topics as estate planning or financial planning for adult children and grandchildren. Even so, other CFIs still have opportunities to invite the next generation into a relationship. Here are a few strategies you can use to build a relationship with the upcoming generation:
- Get an introduction. Ask current baby boomer customers if they’re comfortable introducing you to their adult children and grandchildren. The customers might be open to one or more group conversations about generational wealth and estate planning, as many people want to educate younger generations about how they can be good stewards of the wealth they will receive. Prepare for the possibility that the current customers may not be comfortable discussing precise dollar amounts with their heirs.
- Offer pro bono advice to heirs under 26. Research from the Spectrem Group shows that 20% of investors worth at least $25MM want their financial advisor to engage with their kids as early as age 18. If your CFI offers wealth management services, consider providing free financial planning for the adult children and grandchildren of existing customers through age 26, when children typically leave their parents’ health insurance. Make sure you keep both clients’ information confidential — don’t tell older customers about the younger clients’ finances, no matter how curious they might be. You may want to consider all family assets under a “household” umbrella, to extend discounted rates to younger clients without dropping a minimum asset threshold.
- Tailor your strategy to each generation. Communicate with younger family members using digital technology: email, texts, and video calls. Consider assigning relationship managers who share the same generation as primary contacts for younger family members. Remember that these newer clients may be more interested in hearing about convenient digital offerings, innovation, and social responsibility than their older relations. Meet clients where they are.
Tie all these efforts back to your CFI’s branding and offerings, so that multiple generations of clients can see the value you’re offering them.As baby boomers age, they will pass their assets to their heirs. CFIs can protect their customer and deposit bases while also helping families hang on to inherited wealth by proactively building relationships with the younger adult members of client families.
