With my mother’s passing this year and the personal journey I’ve been on, this article seemed to become even more pertinent than when I first wrote it on my rough draft blog. The concept for these strategies come as much from my personal experience as from the trends described below. My father died when I was in middle school and left my mother and me with the household responsibilities. As an only child of a mother with health challenges of her own, I was brought into many conversations regarding our family’s finances, wills, and trusts that were in place for certain contingencies. This experience, and the years thereafter taught me two things:
1. Families need to talk about money and learn to be comfortable planning with money. To read more about the importance of this, you can read my post “Family Money = Family Conversations“.
2. Financial literacy and contact with various financial specialists are vital to support the stability of a family in the long run.
The professionals my mother and I interacted with included accountants, financial advisers, and insurance brokers. Even today, with my mother’s recent passing, I am continuing to work with the majority of the same experts decades later. Their knowledge of my family background and of my current family make up have made them invaluable resources for my nuclear family as well as my mother and her estate. Building trusting relationships between an adviser and client takes time and the experience I had throughout my teen and early earning years were critical in providing a pathway for this process. There is also the basic concept that inertia, the tendency to resist movement or change, is real. The loss of a loved one is an emotional period for the family and not a time for rash decisions. Being able to act responsively and responsibly takes knowledge and care, and many people, like myself, may see more gains in staying the course than wanting to take on the pains involved in having to migrate to someone new and having to spend money and emotional energy in the process.
While I may not be a financial advisor, as an MBA student with a deep respect for the work financial advisors do, I hope advisors find these strategies thought provoking. Even in my work as a small-business consultant I’ve seen how family-based strategies can even positively affect a business.
Why Advisers Should Consider Family Connection Planning Strategies
*Note: The following figures and strategies may be different for those advisers who offer insurance products as well as financial planning. The longitudinal relationship that an insurance policy creates between an adviser and client would be another area of research.
The United States is about to undergo the largest transfer of wealth in history, with over $40 trillion being handed down within families by 2050(1). While the redistribution of assets from one generation to another is not new, what is distinct now is the magnitude of the movement as well as the speed with which it is happening. Such movement presents financial planners with the challenge of not only helping a large number of clients prepare their portfolios for retirement and estate planning, but also to potentially lose a large amount of assets under management (AUM).
Loss of AUM by individual advisers and their companies through inheritance from client to family is a clear issue. The vast majority of inheriting family members do not continue with the same planner as their previous generation. In fact, only 2-10% of children may stay with the same financial planner upon inheritance. Another trend is that only about 30% of advisers actively seek clients under the age of 40. Such a large movement of clients and assets, combined with the potential of growth in a relatively untapped market, creates an opportunity for advisers to not just maintain clients within families but also reach a population segment who are entering their prime earning years.
Millennials, broadly defined as those between the ages of 23 and 38, number 73 million as of 2019 and are about to outnumber baby boomers. Overall, this generation may be one of the more educated in US history, but still lack basic financial literacy as compared to those over 60. Younger generations are also observed to be less likely to access financial planners. In one summary of research, millennials may be hesitant to access professional support due to potential fees and costs, fear, or the belief that they can do it themselves. The rise in robo-advisers is also a challenge due to their low cost and accessibility. Nerd Wallet, an online publisher and comparison service, listed ways to get “cheap or free financial advice” and placed in-person financial advisers last on the list. Thus, the goal of bringing family members into client meetings might be threefold:
a. educate clients about the importance of educating the next generation.
b. build relationships and trust with family members (spouse, siblings, children, etc.).
c. educate younger earners of the importance of early financial planning even as they pay off debt, buy houses, and otherwise begin to build their own estates.
What Advisers Stand to Gain
The figure below shows that by adopting family connection strategies, advisers can bring new products (ex. deeper family planning, trusts, wealth transfer strategies, insurance products) to existing customers while also marketing existing products and services to new customers (i.e. younger earners).
Financial Product-Market Mix
In order to be able to bring families together for any sort of informational or planning meeting, some core principles would need to be clear to everyone, especially the current client:
a. Maintain trust with clients (grand/parents) by maintaining confidentiality and putting their interests first.
b. Maintain trust with clients (grand/parents) by allowing them to decide what information is shared and to control the scope and direction of how family members may be brought into the planning process.
c. All clients’ contributions and assets are valued and respected.
The added value to clients, and their families, of participating in family connection planning strategies include:
a. Reduce the pains people feel when discussing inheritance.
b. Reduce the challenges people have to undergo when someone passes away.
c. Increase the awareness of the importance of financial advising and current services and products to younger generations within families.
d. Create mechanisms and communication pathways that allow families to engage in the planning and collaborative process even if not physically together.
Family Connection Planning Strategies
Each adviser and company would need to determine the exact process and tools that could be used in bringing clients and their families together. Some preliminary ideas may include:
a. Annual/Semi-Annual “Family” Meetings: These meetings would be client led, preferably in-person, but may also be virtual.
i. Build relationships and trust with family members.
ii. Maintain trust with clients (grand/parents) by allowing them to decide what information to share and to control the meetings.
b. Wealth Worksheets: A platform to allow clients to organize any information they wish to share with designated family members. The selected information may be hard copy, electronic, or online and viewable with a password on a clients’ personal portal.
i. Such an approach would also allow family members to communicate asynchronously outside a meeting.
c. Estate Growth Guides: Most advisers and their companies already provide information about estate planning, insurance, and trusts in-person and online. Estate Growth Guides would differ in that they would help to educate the client on the importance of educating their grand/children about financial literacy. These guides would also contain information that is pertinent to younger earners, such as debt, real estate purchases, and early-career investing.
In the end, the goal would be to increase the touch points between the adviser and client as well as support families with planning important financial decisions before they may be needed. This becomes a win-win-win for the client, the family, and the adviser!
The above article is based upon my personal experience and summary of research.
BY: Jasdeep Singh
UConn MBA Candidate
 Rusoff, J.W. (2016). How advisers can stop losing clients’ heirs as clients. Retrieved from: https://www.thinkadviser.com/2016/03/01/how-advisers-can-stop-losing-clients-heirs-as-clients/?slreturn=20190816213631
 Rusoff, J.W. (2016)
 Mathews, J. (2019). How advisers are missing out on millennials. Retrieved from: https://www.financial-planning.com/news/are-financial-advisers-ignoring-millennial-clients.
 Fry, R. (2018). Millennials projected to overtake Baby Boomers as America’s largest generation. Retrieved from: https://www.pewresearch.org/fact-tank/2018/03/01/millennials-overtake-baby-boomers/.
 Fry. R., Igielnik, R., & Patten, E. (2018). How Millennials today compare with their grandparents 50 years ago. Retrieved from: https://www.pewresearch.org/fact-tank/2018/03/16/how-millennials-compare-with-their-grandparents/.
 Zoominfo. (2018). The top 5 target markets for financial advisers. Retrieved from: https://blog.zoominfo.com/target-markets-for-financial-advisers/.
 Zoominfo. (2018)
 Jackson, A-L. (2019). How to get cheap or free financial advice. Retrieved from: https://www.nerdwallet.com/blog/investing/free-financial-advice/.