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Advisors prepare young clients for $30 trillion transfer of wealth

  • Baby boomers are set to pass on some $30 trillion in assets to heirs.
  • Many firms find roundtables, discussions foster intergenerational communication about inheritance.
  • Younger advisors appear better suited to winning trust, business of Gen X, millennial heirs.

As a $30-plus trillion-dollar transfer of wealth from baby boomers to their heirs heats up, financial advisors are instituting policies and programs to recruit and retain those heirs as clients. Younger advisors are becoming key components of these strategies.

"At our firm, we have recently decided to offer 'family financial roundtables,' where multiple generations can discuss their feelings and preferred strategies for wealth," said Shon Anderson, certified financial planner and chief wealth strategist with Anderson Financial Strategies.

The need became apparent when advisors asked clients how they felt about their loved ones' financial status.

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"We have found that it is often a major source of anxiety for clients," he said. "Kids worry about parents; parents worry about kids."

"They really appreciate us opening up that conversation," Anderson added. "When you have a third party that can prompt a discussion, it allows different generations to air their feelings about their own family's wealth."

The roundtable discussion is a requirement for adult children to become clients, if interested, according to Anderson. No minimum assets are required of them.

The outcomes of these discussions include increased confidence in parents' and children's financial strategies and structures (i.e., estate planning, account titling) and, often, gaining the younger participants as clients.

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"Over the long term, it helps you build the quality of your client base by preventing them from making bad decisions," he said.

In another approach, Capital Asset Management Group has instituted a coaching program focused on young adults.

"[We] engage our current client base and ask them to 'Give the gift of financial independence' whereby many of the parents or grandparents fund the annual retainer for the younger clients," said Samuel Boyd, CFP and senior financial planner with the firm.

The fee is based on the younger client's income, not assets under management, he said.

The program utilizes proprietary software, especially appealing to tech-savvy millennials, and simplifies data collection, financial planning education and goal-setting, he said. It was rolled out last year in response to requests from clients asking for help for their adult children.

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Senior advisors conduct quarterly group coaching meetings followed by personalized one-on-one meetings. Junior advisors assist and get to know the young potential clients in this way.

There are two coaching programs offered. The first helps participants take the steps necessary to complete the financial process (e.g., education, data collection, introduction to the firm) and create a financial plan. The second coaching program builds on the first one, enabling participants to review their financial plans and strategies.

Other firms are raising the profiles of younger advisors. For example, Acorn Financial Services is deploying its junior staff to provide financial coaching for clients' college-age children.

"Our firm has brought in younger advisors," said Aaron Clarke, CFP, a financial planner with Acorn, teaching "them to advise based on different generations' personalities, as well as the topics and issues that different age bands value or worry about."

"After the individual graduates and has a few years' working, we seek to establish a client and trusted advisor relationship to help provide continuing advice ... at a competitive price for their needs." -Aaron Clarke, financial planner at Acorn Financial Services

The younger clients are often concerned with scholarships and student loans, which is something that younger advisors can relate to, he said. Other topics discussed include general budgeting, cash management, credit, long-term planning, renting vs. buying a home, etc. Coaches usually meet with their clients twice a year.

"The key is letting the parents make the introduction," Clarke said.

The cost of the coaching is included within the parents' regular service fees. Of those children who participate, about 80 percent become clients of the firm, Clarke said.

"After the individual graduates and has a few years' working, we seek to establish a client and trusted advisor relationship to help provide continuing advice ... at a competitive price for their needs," he said.

As a firm of 12 people, HTG Investment Advisors often assigns a different advisor to parents and children.

"This provides some confidentiality but also provides a common service experience," said Robin Sherwood, a CFP at the firm. "We start early with children by helping them to set up IRA accounts, counsel them on what to save in their 401(k) plans, how to manage their paychecks and what amount of house they can afford.

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"This helps to form a bond that helps later on."

For clients with adult children, the firm offers fees based on overall family size, Sherwood said. She estimated they retain about 50 percent of the adult children as clients.

She cited several benefits to the policy:

  • Younger advisors relate better to younger clients.
  • Younger clients feel more comfortable asking questions of similar-age advisors.
  • Young advisors can build client relationships for the future.
  • The junior advisors have the opportunity to seek out support with the senior advisors who already understand client family situations.
  • Assigning younger advisors to the younger clients results in a more efficient use of senior advisors' time.

— By Deborah Nason, special to CNBC.com

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