A new report from Oppenheimer and global research firm CoreData Research suggests advisers are missing an opportunity to build long-term relationships with families as wealth transitions across generations.
- One-quarter (25%) of advisers do not prioritise the retention of the next generation as clients.
- Advisers tend to be under-engaged with both their primary clients and their clients’ families, with only around half working to educate the next generation about investing principles
- This study is designed to help advisers build and strengthen their relationships by increasing their understanding of the challenges and priorities that face the different generations.
The report showed more than 90% of beneficiaries change advisers when they inherit (1.). Yet advisers are not taking steps to retain a relationship with the spouses and heirs of clients. The majority of the advisers surveyed (81%) said they talk about estate planning with their primary clients as a way to retain the spouse, while 70% have these conversations as a way to retain heirs of clients. However, one-quarter (25%) of advisers do not prioritise the retention of the next generation as clients.
It also found that advisers tend to be under-engaged with both their primary clients and their clients’ families; for example, only 40% advise their primary clients about spending, and still fewer (32%) teach their primary clients’ children about spending. The vast majority (88%) of advisers explain investment concepts to their primary clients, but only a little over half (54%) work to educate the next generation about investing principles. Best practice would be to prepare spouses and younger generations for the responsibilities of wealth, but also help to preserve that wealth and ensure a seamless transition.
Taking a multi-generational approach
The level of adviser engagement with HNW clients across generations is just one of several findings in The Generations Project U.K.. Amid the greatest inter-generational transfer of wealth in history – an estimated £115 billion in the U.K. over the next 10 years, it set out to capture insight from several generations of HNW investors: Millennials, Generation X, Baby Boomers and the Silent Generation, surveying 900 investors and advisers in the U.K. and another 1,000 investors and advisers in the U.S.[1]
It showed that U.K. advisers have traditionally tended to focus on a particular generation, rather than taking a “whole family” approach, often to the detriment of inter-generational planning and relationships. If they wish to retain an entire family as a long-term client and ensure the smooth transition of family assets from one generation to the next, advisers have to learn to engage with all the different generations.
Generational challenges and adviser disconnects
It’s not just advisers who aren’t engaging: investors also appear reluctant to discuss their finances with their own families. Nearly half the investors we surveyed (46%) aren’t currently talking with their spouse or partner about their finances – and 30% have never discussed them. By facilitating and supporting communication and understanding across the generations, advisers can help to smooth the path to inheritance.
The study also revealed a sizeable gap between what investors want and what advisers believe they want. In particular, many advisers underestimate their HNW clients’ prioritisation of good investment performance. The most important quality sought by HNW Millennial investors in a financial adviser is good investment performance (38%); however, 40% of advisers think that HNW Millennial investors’ top priority is for their adviser to have a clear understanding of their goals, with good investment performance ranking only eighth amongst advisers at 21%, along with fees/commissions.
The study identifies another mismatch in understanding between advisers and clients when it comes to sustainable investments: advisers believe that environmental impact is the most important sustainable investment characteristic (36%) to HNW clients. In fact, sustainability is the most important factor for HNW investors at 29% – and again, the strength of long-term returns from sustainable investment strategies appears to carry greater weight with clients than advisers appreciate (16% of investors versus only 6% of advisers).
Strengthening cross-generational relationships for the long term
In addition to these disconnects, the report showed a tendency for investors of all ages to focus overwhelmingly on U.K. investments – even in a global economy where much of the world’s growth comes from outside the U.K. – and the potential missed opportunities stemming from our finding that few advisers are helping families with financial education.
Evolving investor expectations, changing priorities and generational preferences are having a profound effect on the adviser-client relationship. By transitioning from a one-on-one service to a “whole family” model, advisers may be better positioned to grow relationships and provide trusted advice to the entire family as wealth transitions from one generation to the next.
