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HOW TO RETAIN YOUR CLIENTS’ KIDS
Connecting with the second generation will help your business thrive
by SARAH CUNNINGHAM-SCHARF, a Toronto-based financial writer
RELATIONSHIPS WITH SECOND-GENERATION
clients will soon become vital. Close to $1 trillion will transfer from older to younger generations
in the next decade, says Grant Shorten, director of strategic insights at Renaissance Investments. Of those transfers, an Investor Economics study reports that 85% will end up in the hands of adult children over age 34. But, a 2011 Bank of America study finds only 2% of recipients are expected to keep those funds with their parents’ advisor.
To increase the chance of keeping transferred funds in your book of business, connect with cli- ents’ kids prior to the wealth transfer phase.
Otherwise, your first meeting with the children could be when they’re grieving, says Sajjad Hus- sain, vice-president, private wealth counsellor with Fiduciary Trust Canada. “The advisor and the child need to build a relationship where it’s not going to be awkward or odd dealing with that issue.”
Connecting with adult children
Shorten suggests first analyzing your book to determine which assets would be most damaging
to lose. “An advisor might have 25% to 35% of their client households in the oldest generation. But those households might account for 60% or more of their AUM because they’re the wealthier clients,” says Shorten.
Then, make a list of the clients you want to pri- oritize. “The best candidates are those aging clients who have substantial assets with the advisor now, or who have a substantial personal net worth—or ideally a combination of the two,” he says.
Start the process by inviting the client in to discuss her estate plan. During that conversation, stress the importance of educating executors, who are often the client’s children, on basic financial concepts so they can fulfill their responsibilities.
The goal is to have your client bring her children in to meet you, says Shorten. To achieve this, you’ll need to instill a sense of urgency, so he recommends asking three questions:
1 Have your children served as executors before?
2 Do any of them have backgrounds in accounting
or bookkeeping?
3 Do any of them have backgrounds in finance?
10 AE 05 2015
www.advisor.ca