Are You Burning or Building Generational Bridges?

Are You Burning or Building Generational Bridges?

Fidelity’s 2015 RIA Benchmarking Study found that 23% of clients are 70 years of age or older and that they hold 28% of assets. One can turn those numbers on their head and infer that 77% of those that currently use an advisor are younger than 70 and they hold 72% of the assets. If you find yourself in the position of advising mostly those that fall in the 70 or older segment, it’s probably high time that you give some consideration to attracting those that now represent just over 3/4 of the available client pool. Or, perhaps more importantly, you should turn your attention to attracting those prospects that will soon join the ranks of the under 70 crowd that seek assistance from an advisor. Because, like it or not, the assets of those over 70 now are more likely than not to be managed by a new advisor once that wealth has been transferred. Don’t believe it? According to a PriceWaterhouseCoopers Global Private Banking/Wealth Management Survey in 2011, only around 2% of children maintain the services of their parents’ advisor, and most of the 98% who move on do so upon receiving their inheritance.

Those are scary numbers. I’ve seen other surveys where the percentage of adult children firing their parents’ advisor was as low as 66%. That number isn’t as scary, but it’s still two out of three of your accounts walking away at some point. “Isn’t as scary” is still pretty doggone scary. Hopefully you are now pausing to consider whether or not you are doing everything you can to build healthy relationships with the future heirs of your current client base.

Taking Stock of the Road Ahead (and the One Behind)

Missy Pohlig penned a couple of great posts back in March and April over at Practically Speaking, an SEI Advisor Network blog, that deal with the coming wealth transfer. The first, “The Letter Advisors Will Never Get from Their Clients’ Kids,” is a kind of wake up call as to the reasons clients’ children take their business elsewhere. The second, “Family Matters: How to Include Your Clients’ Kids in the Financial Process,” details some ideas to get you started on building those generational bridges and preventing the advisor-firing that is so prevalent throughout the industry when wealth is transferred.

What kinds of relationships have you built with your clients’ children and grandchildren over the years? Hopefully you’ve taken the time to get to know them, even if only peripherally up to this point. The bad news in terms of retaining these relationships is that statistically the odds are against you. The good news is that these statistics are based upon how most advisors have historically interacted with their clients’ children, i.e., you can begin charting a new path today that includes establishing relationships across generations. If you’ve served their parents faithfully and helped them manage their finances well, it seems natural to assume that you’d have a leg up over those advisors swooping in at such a late date to reap the benefit of your years of hard work. But, if the kids feel like, as Missy pens in the first piece referenced above, that they aren’t “even a blip on your radar,” you are, in fact, in a much worse position than the advisors that have been busily wooing and establishing relationships with them.

Spanning the Generation Gap and Mapping the Future

Unless you are an outlier in these surveys, you probably have some work to do. In terms of ROI of your time, it’s best that you initially begin by determining how you want to go about building relationships with the children and grandchildren of your current clients. You’ll likely find that it’s possible to concurrently establish your processes for relationship-building with children of new clients, but, if not, concentrate primarily on those existing relationships first simply because of the costs of client retention versus the costs of client acquisition.

Now, let’s get this out of the way: pinching a child’s cheeks and telling them how cute they are was never a way to build rapport. If you were the cheek pinchee, you know it hurts. If you are a cheek pincher, cut it out! What we are aiming at here is not pandering, not trying to speak a younger generation’s lingo, but at meeting them in the world they live in, which is almost assuredly different than the world you were raised in, shaped by and now inhabit, particularly if your generation is several removed from theirs. If this means it’s time to bring in a younger advisor to your practice, someone who can relate much more easily to these children and grandchildren that will soon be holding the financial reins, then by all means consider making that investment. A bonus in doing so is that you may be able to help the younger advisor build trust and rapport with older clients to whom they may now provide access.

Regardless of which staff members are primarily involved in spanning the gaps, in improving your firm’s cross-generational relationships, you do need to make sure that you have systems and processes in place to ensure that 1) you are tracking information that will assist you in these efforts, 2) you can segment clients and their heirs based upon both commonalities/differences and their value to your business, 3) you can report on/retrieve client information and/or client groups quickly and easily and 4) you can reach out to clients and their heirs at a moment’s notice, whether it be via phone, email, physical mail, social channels, etc.

CRM is the best solution for handling or initiating each of these activities. Redtail CRM provides you with a wide variety of tools that can assist you with all of the above, including:

  • Data fields that will allow you to track basically anything about both your clients and their heirs, including but certainly not limited to: your standard contact info fields, an Important Information field, Keyword fields, Personal Interests fields, User Defined fields, etc. The more you know about your clients’ families, the better the position you will be in to build and maintain a level of intimacy that can transcend generations.
  • Reporting capabilities that allow you to put all of the data you track to good use. Reporting, in tandem with Redtail’s Advanced Search capabilities, allows you to easily segment your database into dynamic QuickLists or static Tag Groups that you can refer back to whenever needed.
  • Marketing capabilities and integrations that make reaching out a breeze.
  • Workflows and Automations that, once you’ve established them and put them to work in your business, will ensure everyone is following the Best Practices you’ve agreed upon for not only generational relationship building, but for all of your business processes.

If it Isn’t in Redtail, it Didn’t Happen

The methods at your disposal for building strong and lasting relationships with your clients’ heirs are limited only by your imagination (and, of course, there are lots of resources on the topic accessible via a quick Google search). That said, most of these methods are partially or fully dependent upon your knowledge of your clients and their heirs, the point being that you should listen to your clients with purpose, take careful and detailed Notes in Redtail after every interaction and make sure that your staff is doing the same. Everything you can learn about your clients and their heirs (your potential future clients) should be noted in Redtail, whether in the form of an actual Note or in one of those data fields referenced above. A sticky note is a fine thing, but it is throwaway by nature. Data in your CRM isn’t going anywhere and, if you begin building real relationships with your clients’ future heirs now based upon the years of shared history that you can easily draw upon, you should be able to outperform the industry standard in terms of making sure that the adult children and grandchildren of your clients don’t walk away from you upon receiving their inheritance. In short, you can turn those scary numbers above to your advantage, differentiating your practice as one that has appeal across generations, and build bridges where others are burning them.

Paul Cantrell
Paul Cantrell
Paul handles technical writing as well as producing other instructional content for Redtail Technology. He's been in FinTech for 14 years, the last eight of which have been with Redtail.

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