An advisor’s guide to engaging the modern family

The following is an excerpt from the new white paper from Cadaret, Grant & Co., Inc. and the InvestmentNews Content Strategy Studio, “An Advisor’s Guide to Engaging the Modern Family”.

The following scenario is all too common: An advisor works with a couple successfully for many, many years, and over that time, the advisor’s efforts result in the accumulation of a sizeable nest egg from which the couple begins drawing income in retirement. Even after a decade or more of withdrawals, a considerable sum remains.

All too often, after the passing of the spouse with whom the advisor had the primary relationship, the surviving spouse closes the account and moves to another advisor. Similarly, when a child or children or others inherit the wealth, the nest egg is removed and the advisory relationship begun by the parents ends because the inheritors have no tie to the advisor.

Whenever such events occur, advisors may be surprised or even hurt by the seeming betrayal after years of successful and appreciated service. But the transfer of assets after the death of the person we can call the “primary client” is almost always the result of a failure of the advisor to develop a relationship with a less-involved spouse and the client’s or clients’ adult children.

The loss of assets that occurs due to a lack of engagement results not only in loss of immediate income for the advisor but also a decline future wealth due to a lower value for their business, say advisory firm valuation experts.

To help advisors stanch the outflows that too often occur when clients pass away and to assist them in developing relationships with heirs, this guide is offered as a practical resource, both to increase wallet share with existing clients in the short term and to improve retention rates in the long run. It will cover four key elements: developing an engagement plan, engaging the non-involved spouse, understanding the needs of Millennials and Gen Xers in order to succeed in developing relationships with clients’ children, and working with elderly clients and their families.

The underpinnings of a successful engagement plan require taking a holistic view of clients and their families in a way that extends beyond the traditional “know your customer” efforts required by regulations that were created at a time when most advisory relationships were largely investment-oriented and transactional.

Developing an engagement plan will put an advisor in a distinct—and advantaged—minority, since such plans currently are absent among most advisors. Recent research conducted by InvestmentNews reveals that fewer than 24% of advisors currently have an engagement plan in place. Importantly, 57% of advisors at firms of all types have no formal plan or strategy in place for developing relationships with their clients’ children, with the remaining 19% of advisors also having no plan in place currently, but expecting to develop one. In that latter group, about two-thirds expect to have a plan in place within a year, and one-third within one to three years. When those with a plan were asked about its success in retaining clients’ children, most advisors—about 56%—judged those plans to be moderately successful, with about 31% saying that the lack of a relationship with adult children was the single biggest reason for failing to retain them.