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Pershing Study Finds that Advisory Firms Need to Rethink Their Multigenerational Planning Offering to Adequately Prepare Clients for the Looming Wealth Transfer

According to a study released today from Pershing LLC (Pershing), a BNY Mellon company, most advisors are not actively taking steps to prepare for the $30 trillion that investors will transfer to heirs over the next 30 years. The new study, "30 in 30: How Advisors Can Capitalize on a $30 Trillion Wealth Transfer Over the Next 30 Years," examines the risks and opportunities associated with wealth transfer and what advisors should be doing to make multigenerational planning a cornerstone of their businesses. With an estimated $12 trillion in financial and non-financial assets currently changing hands, it is estimated that another $30 trillion will be transferred over the next three decades. In order to effectively service their clients and maintain the integrity of their firms, it is imperative that advisors redefine who their "client" is. This entails the expansion of their relationships to include effective, tax-efficient financial transfer solutions that span multiple generations in their clients' families.

Pershing's study, drawn from more than 1,200 investors from across the country, shows advisors may be taking needless risks and missing promising opportunities if they are not having a wealth-transfer conversation with their clients. According to the study, only 35% of investors surveyed said their advisor provides family wealth management, defined as a service that helps them manage and transfer wealth across generations. With this enormous opportunity, Pershing suggests advisors need to revise the definition of "client" – ensuring that the family group is at the forefront of a practice instead of just the primary account holders. Advisors must build relationships with both spouses and their heirs, making sure they are involved when planning for the transfer of wealth.

"Many advisors often wait until the moment of transfer to engage the children or heirs of their clients, which is simply too late," says Kim Dellarocca, global head of segment marketing and practice management at Pershing. "Chances are your clients' children and heirs will have formed relationships with other advisors by the time your clients are 65. The longer you wait to form relationships with the next generation, the greater your risk of losing those assets when the wealth changes hands."

Only 17% of clients with children say their adult children work with their primary advisor. When asked how advisors came to work with their children, only 3% of clients said their advisor asked to meet with their children. Forty-one percent of investors said they took the initiative and asked their advisor to meet with their children. The numbers suggest that clients aren't pushing to involve their families in the wealth-transfer conversation, but it's also apparent that advisors are not leading the way.

In order to take action, Pershing outlines 10 steps advisors can take to build a multigenerational practice:

1. Assess your current practice and review current clients
Do you have a clear sense of what assets will be at risk when a client's wealth is transferred?
2. Review your current definition of "client"
Expand the definition from individual, through household, to family.
3. Refine your service offering
Offerings should now be tailored to meeting the needs of a family, instead of an individual.
4. Rework your process
Engage both spouses as well as children, or other heirs in cases where clients do not have children.
5. Consider your team
Include women and younger members on your team who can engage with the next generation.
6. Build a network
Clients will need assistance with complex needs of wills, trusts, tax and estate planning. Develop the professional relationships your clients will need if you don't have these capabilities in-house.
7. Educate yourself
Become aware of the complexities associated with tax, trust and estate planning to help guide your clients.
8. Audit your business
Ensure your educational and social activities appeal to families and that they encourage discussion between couples and across generations.
9. Solicit client feedback
You need to know if you are forging strong relationships with all members of the family group. If you aren't, you can adjust accordingly.
10. Be a leader
Lead the relationship with your family client. Don't wait for your clients to ask for direction on wealth-transfer issues.