In a bid to build their businesses, some financial advisers are turning to an untapped market: their clients' young children.
“I discovered a lot of advisers weren't doing multigenerational planning and were missing huge opportunities,” said Jennifer Strong, a certified financial planner with J.E. Strong Financial Network in Lakeport, Calif.
The fees from this market are low, but the practice can pay off.
For instance, one of Ms. Strong's first junior clients was 13 years old when she began working with him. He is now married, and she manages his portfolio, which contains several mutual funds and insurance policies.
Ms. Strong manages about $90 million in assets, and about 30 of her 850 clients are under 18. Her youngest client is 5 years old.
Ms. Strong invests her young clients' funds in mutual funds, according to terms spelled out in a contract. Under terms of the contract, parents agree to match every dollar the child puts into the account.
The funds can be withdrawn only for the purchase of a car, for the down payment on a house or to fund a college education. Parents retain veto power over the decision to buy a car.
Another technique Ms. Strong employs is to give each child a piggy bank with slots for saving, investing, spending and donating. The investing portion goes toward the purchase of mutual funds.
The urge to teach financial savvy to kids is particularly strong in newly affluent families.
“They don't want to raise entitled children. I think it's an area that's virtually untapped,” said Allyson Saldana, an adviser with AMS Capital Management in San Mateo, Calif., which is in the process of creating a program for children.
She plans to establish a seminar series for children who are at least 10 and to encourage them to save $1 each day for an eventual investment in mutual funds.
AMS has about $20 million under management.
Another adviser's approach is to invite children to meetings with advisers to discuss rudimentary finances.
“We've had them in at age 10 or 11. We start talking about what a checking account is and how to build a savings account,” said Diane Pearson, an adviser with Legend Financial Advisors Inc. in Pittsburgh, which has about $330 million in assets.
Meanwhile, Commonwealth Financial Network in Waltham, Mass., this year plans to distribute pamphlets that train advisers on how to discuss investing with children. In addition, the firm has met with 500 advisers to teach them how to pursue this niche, said Tere D'Amato, director of advanced planning at the firm.
In May, Baltimore-based
T. Rowe Price Group Inc. joined with The Walt Disney Co. of Burbank, Calif., to launch the Great Piggy Bank Adventure, an exhibit at Epcot Theme Park in Lake Buena Vista, Fla., and an online game designed for parents to educate their children about finances.
In addition,
State Street Global Advisors of Boston launched a campaign last month designed to help advisers become resources to parents who want to educate their children about investing.
E-mail Lisa Shidler at [email protected].
