According to an InvestmentNews survey taken a few years back, 66% of children fire their parents’ financial advisors after inheriting their wealth. More recent research by the Boston-based research firm, Cerulli Associates, confirms this, although the numbers are decidedly more dismal. Their findings state that only 13 percent of the affluent investors surveyed report working with the same advisor that their parents used.
There is little wonder when one considers that more than half of the 544 advisors polled in the InvestmentNews Data survey reported meeting with their clients’ children less than once a year and just over 18% had never met with them.
After all, while the average family office advisor is typically 49+ years of age and spends endless hours crafting and discussing investment and asset management strategies with the family’s older generations, the ultra-high-net-worth 20-something millennial heirs are off at events like Burning Man.
While the generation gap may seem more like a chasm, failure to connect with the next generation poses a significant problem to family office advisors, many of whom have spent the better parts of their careers fostering profitable relationships with family patriarchs.
Advisors who cannot effectively engage and establish relationships with the next generation, not only run the risk of losing substantial volumes of business and income but will also discover that their consultancies are far less valuable to potential buyers.
For those who have not already taken steps to mitigate these risks, now is the time to identify where the issues lie, find ways to overcome them and leverage the opportunities these changes will bring.
Addressing the lack of next-generation engagement
When it comes to family offices, many trusted advisors are seasoned professionals who have developed close ties to the family heads. These relationships often span decades and the inherent trust and value these advisors contribute cannot be discounted.
It is generally accepted that people want to invest with those they know and trust. Getting to know and capturing next-generation heirs and earning their long-term loyalty is vital. This requires a shift from the one-to-one to one-to-many model in which the advisor acts as a consultant to the whole family and not only the primary wealth creator.
This post originally appeared here.
