Retirement planning meetings could also offer up an opportunity for advisors to inquire about the next generation.
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For financial advisors, retaining the children of their current clients as future clients has become even more important for their practices’ long-term success as $1 out of every $5 in Canadian household wealth is due to change hands in the next decade. But this task is not shaping up to be an easy one.
A recent study from Boston-based Cerulli Associates Inc. found that just 19 per cent of affluent investors surveyed use the same advisor as their parents. The research firm also found that 90 per cent of affluent investors said they did not consider their parents’ advisor in their selection process.
So, what do advisors need to do to win over the kids of their current clients?
First, they have to decide if working with their clients’ children fits their business model or whether that is even something they want to do, says Sybil Verch, executive vice president and head of private client solutions at Raymond James Ltd. in Vancouver.
“[Advisors] need to be intentional about the approach to working with [their clients’] children and whether they want to build relationships with the children, [because] maybe, the kids aren’t the right fit [for their businesses],” she says.
“If you’re a wealth manager with a certain salary or investment requirement, do you want to drop it down a notch? Or if the kids are on the other end of the spectrum and making loads of money and maybe outside your wheelhouse in terms of the things they want done, is that time to say, ‘I might not be the person for you.’”
The alternative could be working pro bono for decades in hopes the children inherit enough from their parents to meet the minimum requirements, “but that’s not a great business model,” Ms. Verch says.
Starting with financial literacy
There are ways advisors can engage the children in a scalable manner without taking attention away from the current time and services provided to the parents, she says
“Let’s say … your clients are going to want your help in supporting their kids with financial literacy. You can do that without taking [the children] on as actual clients,” Ms. Verch notes.
“You can deliver what we call a one-to-many strategy where you offer and invite them. You can send them newsletters, invite them to webinars or client events.”
These resources can give the initial contact the advisor may want while fulfilling the needs of the client without requiring added time.
“But I can’t stress this enough. Don’t do it just because everyone else says you should be without thinking about it,” Ms. Verch adds.
If these are the potential clients advisors want, then it’s important to be dedicated to building a relationship, which could mean going as far as having a dedicated person in the office who is given this task, says Dominic Plante, senior investment counsellor and portfolio manager at BMO Private Investment Counsel Inc. in Montreal.
“I have one person in charge of making sure we speak to the children and that we are involved in their lives,” Mr. Plante says. “We don’t speak to them because they are the kids of ‘X’ client. It’s because we are interested in their story, who they are, what they’re looking for, and letting them know we’re listening.”
He adds that treating these potential clients as separate entities from their parents is important because they will have different future goals and investment objectives.
Starting these conversations and building a relationship can happen as part of a financial literacy plan and can involve younger children as well, Mr. Plante says. His team has two or more in-person meetings a year with these potential clients.
“I’ve had some cases when I’ve had meetings with 12- and 13-year-olds just to talk about money, and discussing things such as bank accounts, what’s a credit card, and how you use a debit card because they don’t learn that at school,” he says.
Creating opportunities from life events
Retirement planning meetings could also offer up an opportunity for advisors to inquire about the next generation, says Raphael Ambrozewicz, financial advisor and mutual funds specialist at BlueShore Financial Credit Union in Vancouver.
“There are some triggering events I identify as opportunities, and the sooner you act on them, the higher the likelihood you’re going to be part of the conversation later on – and retirement planning is one of those times,” he says.
“That’s when you’re asking [a client] about a will, power of attorney, beneficiaries and finding out the most important and immediate people that will be able to make financial decisions.”
So, it’s good to suggest this inner circle is brought into the discussions, he adds.
Mr. Ambrozewicz says events such as downsizing or selling a business are also instances in which money is in motion and might create opportunities to make introductions to the next generation. But he cautions that timing is everything in building relationships and to treat any of these events as an audition.
“I found if you take care of your clients during any of these events, you will have the opportunity to meet the beneficiaries, which are often children,” he adds.
“So, you have the opportunity to show yourself, who you are, and they can see how you’ve taken care of their parents.”
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