How to hold onto assets after an inheritance

Advisers serious about providing multigenerational planning are going to have to structure their practices and processes differently in many cases, a new report finds. Many advisers are looking to form relationships with clients' children in hopes of picking up or holding onto their share of the $30 trillion shifting down through the generations in the next three decades. However, creating those bonds will require diversity at firms and processes that appeal to different individuals based on their preferences and experiences, according to a report released Thursday by Pershing. The changes begin with a mental shift on the part of advisers that the client isn't John Smith, but is the Smith family or enterprise, said Kim Dellarocca, global head of segment marketing and practice management at Pershing, a Bank of New York Mellon Corp. subsidiary. “Advisers need to see clients not as individuals or households but as multigenerational families or networks,” she said. “Depending on how that wealth is to move around, the adviser needs to really be at the center of it.” To date, that doesn't appear to be happening. Only 17% of clients who have adult children report their adult children are using their same adviser, the report said. About 41% of clients' adult children aren't using any adviser at all, it said. “That's a lot of potential and it goes to show that a lot of conversations aren't happening and a lot of relationship building is not going on,” Ms. Dellarocca said. Research shows that clients of advisers who discuss wealth transfer among generations are more engaged — which translates into them using fewer advisers, providing more referrals and generating more revenue, she said. Advisers need to start talking to clients about working with the family as a whole, even when the client is still a prospect, she said. The adviser should explain that to execute on the client's goals he or she needs to work with “the bigger picture.” Bring up how quickly wealth is lost in the second generation and about how it's mostly gone in the third, Ms. Dellarocca said. In addition to marketing the multigenerational approach from the start, advisers should consider the events they offer clients and make sure some of them are family-oriented, she said. Advisers also need to structure their businesses so their team of professionals is diverse in terms of age, ethnicity and gender, Ms. Dellarocca said. Advisers shouldn't hire only those who look like themselves and have had similar experiences. It's not just that a younger associate might get along well with a client's daughter. It's important to have diversity among the leadership and team management to ensure someone is speaking for the disparate needs and preferences of a full multigenerational client base, she said. The whole client experience, including the actual investment process, also needs to change to take into account how different generations live, and feel about authority and collaboration, the report said. A multigenerational approach to investments might include adjusting investment policy statements and assets to accommodate a woman's longer lifespan, said Cynthia Steer, head of manager research and investment solutions for BNY Mellon. A young man and a young woman may aggregate the same amount of money in the end, but they are likely to spend it at different times, Ms. Steer said. Recognizing the differences will affect how portfolios are structured to include cash, equity and bonds, she said. Ms. Dellarocca said not all clients will be willing to talk about wealth transfer because they don't want to talk about finances with their children or don't recognize the value of discussing less tangible topics with their adviser. Advisers should look at their 10 top clients and ask themselves: “If something happened to him, would she call me?” and then ask, “If something happened to both of them, would their kids call me?” The answers will immediately point out where the adviser has work to do, Ms. Dellarocca said.