Essential elements of a competitive wealth transfer offering

To maintain the business of a multigenerational family, advisors need to offer thorough and thoughtful estate planning that greases the wheels for their clients' heirs to stay loyal. 

Yet many wealth management firms lack a comprehensive wealth transfer strategy to offer those clients, according to new research by Financial Planning's parent company Arizent. 

Arizent's report this week, "Capturing the Next Wave of Clients," surveyed 394 wealth management professionals at firms big and small across the industry, from wirehouses to registered investment advisors, and found that only 57% of all firms had such an offering —  defined as "a framework to ensure a client's ability to successfully transition assets to heirs." 

That means over four in 10 respondents did not offer systematic planning for the eventual home of clients' assets, despite the ongoing wave of $84 trillion that Cerulli Associates predicts will pass down through 2045. The disparity was especially pronounced between the largest firms — which each had $1 billion or more in assets under management — and the smallest — which had under $100 million in AUM. More than two-thirds, or 68%, of the largest firms had a wealth transfer strategy in place, but only 42% of the smallest ones did. 

"Many advisors are used to serving an older client base and are concerned about relating to younger consumers," the report said, adding that most advisors' clients were over age 45 — and often, "in the 60-plus age group." 

However, "older clients will eventually pass away and need to be replaced with other clients for the business to continue," the report said. Hiring younger talent that can relate to those heirs can help address such concerns. That could also secure the future of the advisors' own businesses — since young talent could later be groomed to take over the business when current owners retire.  

Read more: 5 takeaways from Arizent's research on the great wealth transfer

All the bells and whistles
So what does a successful wealth transfer plan look like? Arizent identified several core service areas that advisors who do offer such plans tend to have. These include "estate planning, tax strategies ... financial literacy education, family meeting facilitation, values-based legacy planning and inheritor stewardship skills," the report said. 

Firms with such plans also often increase their presence on social media to better relate to younger potential clients — something that most respondents overall, though, said they did not do. "Social media is where many younger generations can be reached, and more importantly, educated on the need for sound financial advice," the report said. 

Specifically, family meeting facilitation is an important service and can have many components. Advisors could host "entire family" events once or twice a year, encourage clients to invite younger children in the family to "relevant client meetings," the report said, and offer discounted fees to clients' children or grandchildren. 

And more importantly, advisors need to become comfortable with navigating, even mediating, difficult family conversations at those meetings as a trusted outsider. 

Read more: To win the great wealth transfer, financial advisors must be willing to reject old narratives

The heart of the matter
"Overcoming the more emotional aspects of planning remains central to success" when it comes to wealth transfer planning, said Chayce Horton, a research analyst on Cerulli Associates' wealth management team. 

The best way for high net worth families to proceed with these conversations is through family meetings and "facilitating regular communication," Horton said, citing recent research by Cerulli on high net worth estate planning practices. 

"Almost all families, and especially those with significant wealth, struggle with maintaining an active dialogue about the future of their family's balance sheet," Horton said. "This is why we find that successful wealth planners allot substantial time to creating frequent and structured meetings and gatherings among widely dispersed families that often span generations." 

To ease into such meetings, advisors could help families formulate a shared family mission statement, Horton said, or guide them in an activity such as "inclusive charitable planning" that helps family members "aggregate and codify values and a sense of purpose."

For Amy Castoro, the president and CEO of high net worth estate planning firm The Williams Group in San Clemente, California, there's also a significant benefit to society if advisors can succeed in getting families to think holistically and communicate positively about their wealth transfer plans — it diminishes the chances that heirs will fight over the will after the fact, which could fritter away the family wealth in the courts when it could have been used for more productive ends. 

"The more families we can get talking about their wealth, the better off their relationships are going to be," Castoro said.

"And what we've learned is that when families stay together, their philanthropy can change the world."