Most advisors are not actively taking steps to prepare for the $30 trillion that investors will transfer to heirs over the next 30 years, according to a study released today from Pershing, a BNY Mellon company.
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.
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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.
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By GlobalDataWith 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.
