The largest intergenerational transfer of wealth has already started. According to one projection, about U.S. $41 trillion will be handed over to heirs by 2052. Financial advisors are very likely to lose investable assets when their clients while alive or at death transfer monies to inheritors.
In a survey of 144 heirs who inherited a minimum of U.S. $2 million, 96.5% of them fired the financial advisors that were managing the funds for their parents. There are a number of interrelated reasons for this decision.
Topping the list, cited by about three-quarters of the inheritors, is that they had their own financial advisors or wealth managers. The heirs gave the monies to these professionals with whom they have solid relationships. Contributing to the shifting of funds is the fact that nearly three out of five of the inheritors reported they do not know their parents’ financial advisors. The parents’ financial advisors have tended not to take actions to build relationships with the heirs.
A third of the inheritors said they were uncomfortable with their parents’ financial advisors. And more than a quarter of the heirs reported that they could not relate to their parent’s financial advisors with a similar percentage saying they simply did not like these advisors. Nearly a fifth of the inheritors said their parents’ financial advisors were “out of touch,” and slightly fewer of them said these financial advisors were too difficult to work with.
The bottom line is that heirs are inclined to take their inheritance (i.e., investable assets) away from their parent’s financial advisors and turn them over to professionals with whom they have a stronger relationship. There are a number of different ways for financial advisors to maintain these monies when inheritors have control over the funds. However, doing so requires being forward thinking, highly systematic, and being able to customize asset retention strategies to particular client situations.