Succession Planning for Your Clients and Firm

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One of the most popular topics at financial advisor conferences over the past decade has been “next-gen” opportunities. Whether focused on the “great generational transfer of wealth” or the ”next generation of financial advisors,” both have a direct impact on the aging population of financial advisors and their clients.

According to research firm Cerulli Associates, the average financial advisor is 51 years old and nearly 40% of all advisors are within 10 years of retirement. Advisors who are near, or part of this rapidly growing category are seeking opportunities to transition their practices to younger advisors, as well as looking for ways to connect with their clients’ next generations who will be inheriting the assets advisors currently manage. Initiating and developing relationships with clients’ children and younger heirs is a significant factor in crafting a successful succession plan that will insure assets stay with your firm, creating revenue continuity and generating new clients who can be served by an advisor’s successor.

This next generation of investors who will inherit trillions of dollars from their parents and grandparents over the next few decades often prefer to work with an advisor in their own age group. A 2015 survey by Deloitte found that for clients who had children using advisors, over half were not working with their parents’ advisor. Additionally, a Vanguard study indicated that 95% of children fire their parent’s advisor upon receiving an inheritance.

Tragically, many advisors first interaction with the client’s heirs is when they are grieving the loss of a parent. Many advisors are unaware of their client’s estate plans and how assets will be passed on to their heirs. Advisors often fumble with techniques and strategies to connect with their clients’ children and younger heirs.

Advisors are certainly not entitled to meet their client’s children. Simply asking your clients to introduce you to their children can be awkward and uncomfortable for both parties. Additionally, some parents are reluctant to speak with their children about money and might feel awkward about letting their kids know how much they may inherit.