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SOS financial planners: talk to clients about intergenerational wealth management
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John Kavanagh
Financial planners who want to continue to advise on the investment and management of assets as they change hands from one generation to the next must start to build relationships with the next generation.
And to do that successfully they must develop an understanding of how different generations view wealth management.
A State Street Global Advisors report, Roadmap for a New Landscape, estimates that over the next 30 years between US$30 and US$40 trillion will change hands in the form of inheritance in the United States (the report does not have Australian data, but clearly it has a strong message for the local planning industry).
State Street found that when children inherit wealth from their parents, only 29 per cent retain their parents’ adviser.
However, State Street’s survey of investors indicates that advisers have a role to play in intergenerational wealth management. “But some important conversations are not taking place,” the report says.
State Street found that clients tend to put off estate planning discussions and so advisers need to initiate discussions about the wealth transfer process.
The report says: “Many parents spend a great deal of time preparing the money for the family but very little time preparing the family for the money. An adviser can take a lead here. Take time to build relationships with the rest of the family. Suggest existing clients involve their children in the planning process.”
State Street says that to make this process work it is critical that an adviser understands generational differences.
For example, with Generation X and Millennials there are some new variables to consider. These investors have a more collaborative planning style and expect real-time information delivery.
Millenials are often seen as “slackers” for living at home with their parents after college, but they do because saving money is a priority and they are great savers.
Millenials live in a more social environment and are often more concerned with socially-responsible investing.
Generation X tend to be goals-based and more risk tolerant. “Maybe add a junior adviser to the team to partner with the next generation,” the report says
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