Advisors Need to Bring Clients’ Kids into the Conversation

 In Professional Development

Parents are looking for guidance on how to talk to their children about money. Retirement Director Ben Rizzuto explains how advisors can address this need while establishing themselves as the family’s primary wealth manager – all without putting their other client relationships at risk.

As parents, we are always trying to give our children advice on how they should live their lives. Most of the time, that advice and even our pleas to simply sit down and talk fall on deaf ears. But as parents age, the conversations they need to have with their children become increasingly important – particularly as it relates to financial issues.

When both parents and children are younger, financial conversations often focus on budgeting, debt management and other more basic financial literacy topics. Later in life, it’s time to approach more serious and complex topics such as long-term care and transfer of wealth. These are clearly difficult conversations. However, broaching these subjects early – rather than waiting until difficult decisions must be made immediately – can make them easier to manage.

New research conducted by Janus Henderson Investors, the Financial Planning Association and Investopedia shows that most parents want to do a better job of communicating about money with their children. The problem is most advisors don’t often talk to their clients about how to initiate money conversations with their kids. Only 35% of financial advisors say they proactively bring up the issue – and 77% of investors say they have never discussed the topic with their advisor.

These findings show there is a clear opportunity for advisors to provide guidance their clients are actively seeking. But how can advisors bring clients’ children into the financial planning conversation in a way that adds to the existing relationship but isn’t a drag on productivity or time?

Answering this question is especially important for advisors and families given the amount of money that is set to change hands over the next few decades. The Boston College Center for Wealth and Philanthropy estimates that $59 trillion will transfer from 93.5 million estates between 2007 and 2061. Obviously, families want to prepare the next generation to receive and preserve this wealth. And while advisors naturally want to continue to manage those assets, there is no guarantee that will happen. When parents pass away and transfer money to their children, the existing advisor is often fired within a year.

Building a relationship with clients’ children early on can help improve the likelihood that advisors will retain those younger generations as clients in the future. Following are some ways advisors can start developing those relationships while also meeting the expressed needs of their adult clients who are looking for guidance on productive family finance conversations.

  1. Facilitate an annual family money meeting that includes not only parents but also children, grandparents and others. This meeting could serve to answer questions about current household finances, the family estate or important documents such as wills and trusts, as well as begin an ongoing conversation around the family’s wealth.
  2. Consider developing a packet of information that can help young adults understand the issues they are facing. This could include topics such as student loan repayment options and career-related information such as negotiating salaries. Younger generations may also be interested in learning about environmental, social and governance (ESG) investing. And simple tools like budgeting templates – particularly those available as apps – are always a great way for young investors to start establishing good money habits.
  3. Take steps to ensure you have adequate time to engage with clients’ children without detracting from your other client relationships. If time is a serious concern, perhaps have a more junior advisor in your office handle the logistics of scheduling family meetings. However, if the goal is to build the relationship, it’s important that you be present during those meetings and devote your full attention to the conversation. If that doesn’t seem possible, it might make sense to think about your book more holistically and trim existing relationships that are no longer core to your practice. Be intentional about the process.

However you choose to go about it, it’s vital to foster a relationship with your clients’ children. Not only are your existing clients – the parents – concerned about these topics, but their children will also be the main recipients of their wealth in the future. Bringing children into the financial conversation can help ensure a smooth transfer of wealth and solidify you as the family’s primary wealth manager.

Help your clients and their loved ones better prepare for the future.

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The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a professional advisor. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.
Reproduced here with permission and under license from Investopedia. First published on 5/13/19 at https://www.investopedia.com/advisors-need-to-bring-clients-kids-into-the-conversation-4685770.

C-0619-24279 06-30-20

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