Risks and opportunities ahead of the great wealth transfer

The great wealth transfer will shift $84 trillion from baby boomers to heirs by 2045, Cerulli Associates wrote in 2022. But only 42 percent of people who expect to receive an inheritance feel comfortable handling their anticipated wealth, New York Life found in its own survey.

These circumstances present a never-before-seen opportunity for forward-thinking advisors to grow their businesses – if they act now. To do so, start with an understanding of your practice’s unique risks and opportunities.

Is your practice characterized by any of the following?

• A baby boomer-heavy client base
• A small team, or just yourself
• No business succession plans in place
• An established, strong community reputation

If so, you may be caught flat-footed when these assets transfer hands.

Your primary risk may be a rapid decline in assets under management, as only 19 percent of investors use their parents’ financial advisors, Cerulli Associates found in 2023. You may also face challenges marketing your practice to younger heirs, whose needs and expectations differ from those of an older client base.

But your strong community reputation presents opportunities.

The priority is building relationships with your clients’ heirs. Try intimate events that enable you to connect personally, like informal dinners or strategic family planning sessions, during which you can demonstrate your value to the whole family. Ask your clients if you can reach out to their heirs directly, proactively reinforcing your commitment to the future of their family’s wealth.

Next, create a succession plan for your business. Consider forging a succession planning agreement with another well-established practice and making a formal announcement to your client base, promoting the resources and tools available through your new “merged” practice. This may prompt clients to review their existing accounts and connect you with their heirs as they finalize beneficiary decisions.

Is your practice characterized by any of these?

• Some multi-generational client relationships
• A mid-sized team with diverse skill sets
• Succession plans in development

If so, you’re in a better position to capitalize on wealth-transfer opportunities. But beware of communication blind spots.

For example, heirs could be less knowledgeable about the products they’ll inherit, and may lack confidence to make decisions. Younger heirs may also be more dubious about forming traditional client-advisor relationships, having grown up with different expectations about financial guidance. Also, heirs may be geographically dispersed or speak different languages, challenging ongoing engagement and meaningful connection to your firm.

Tailored communication is key. Keep things simple and adjust your style according to the nuances of each distinct generation. A robust digital strategy can also ensure you can connect directly with clients and heirs who don’t live locally. Create a strategic calendar of social media and email marketing activity that will support consistency and engagement and help foster closer relationships. You can also try conducting a survey among your clients about the needs and preferences of their heirs. Results can help inform how and when you share information.

And is your practice characterized by any of these?

• Mostly intergenerational client relationships
• An intergenerational team to serve them now and in the future
• Succession plans in place for your own business

You may already be in position to handle the next generation of clients. Take advantage of this “calm before the storm” to refine your practice management and further solidify your competitive advantage.

Focus now on refining your processes. Template your success by building onboarding checklists and client meeting agenda templates, and maintain an updated CRM with client preferences, all to enable service consistency. Build in opportunities to remind clients and heirs of the value you provide by summarizing the actions, decisions, and conversations you have with them each year at their annual review meeting. You can also share the behind-the-scenes of your practice by documenting things such as the continuing education that your staff completed, due-diligence meetings regarding investments, or industry events you attended.

Phil Caminiti is managing director, head of sales and relationship management for retail annuities at New York Life.