Dave is a successful director in the financial services industry. He receives competitive compensation for his work, which helps him meet life’s challenges of taking care of his young son, paying down his mortgage and saving for retirement. For many advisors, he would be an ideal prospect. Dave’s mother has a long-time relationship with an advisor, who has never asked him if he needs any financial advice or even introduced himself to Dave.
Does this situation sound familiar?
Evidence shows his scenario is not unique and often leads to missed opportunities to expand your business:
- 65% of clients’ children have never met their parents’ advisor.1
- 49% of children who inherit wealth leave their parents’ advisor.2
For boomers and their children, how to manage inheritances is a high priority now and will be even more important over the next 20 years. They need strategies; for example, naming beneficiaries, moving non-registered assets to registered, tax-sheltered accounts, purchasing life insurance to cover mortgages and the tax liability for properties, establishing trusts, and creating wills and estate plans.
A tough conversation now; a tougher conversation later
Many clients may be avoiding wealth transfer and legacy conversations. In fact, almost 7 out of 10 clients (69%) say they haven’t discussed — or they aren’t sure if they’ve discussed — family wealth management with their advisors.3 And almost 6 out of 10 wealthy Canadians (58%) haven’t discussed instructions for their estate with their heirs.4 Families are often uncomfortable talking about money with each other, so typically, they don’t.
When family members do have wealth management conversations with advisors, it’s a positive experience, with almost all (94%) saying the discussion was helpful.3
Above all, boomers need to accept their mortality and have that often difficult conversation with those they’ll leave behind.
Research tells us that:
- 70% of wealth transfers fail;
- a staggering 60% of wealth transfers that fail do so because of a breakdown in trust and communication;
- an additional 25% fail because heirs aren’t prepared for the unexpected reality of an inheritance.5
Talking with clients about their legacy wishes is a foundational step in starting the conversation. It’s about learning what’s important to them. Understanding how they want to be remembered. Recognizing how loved ones fit into their legacy plan. And knowing who the people who matter most to them are and connecting with them.
By helping clients start estate and wealth transfer conversations with their children, you can strengthen current relationships, build new ones, and remove some financial uncertainty, so the experience of dealing with a death in the family is less financially stressful during that difficult time.
If clients don’t face their inevitable mortality and acknowledge that their loved ones’ lives will go on, probate or unnecessary taxes can lead to a much smaller legacy — and a more difficult one all around to transfer.
Ensuring that families remain whole and harmonious after parents pass away will help you earn the respected position of the trusted family wealth advisor.
Don’t put off to tomorrow what you could do today
Life is filled with uncertainties, but not knowing clients’ wishes and heirs doesn’t need to be one of them. Start establishing rapport with clients’ children, developing new relationships, and reinforcing the value of your holistic financial advice today.
It’s a responsible conversation. And one worth having.
Estimates of intergenerational wealth transfers vary, but one projection indicates $1 trillion in wealth will transfer to heirs in Canada over 10 years.6 From a bottom-line point of view, gaining adult children as clients could ultimately result in keeping significant assets within your business.
If you want to learn more about Sun Life’s wealth and estate planning initiatives and resources, contact the Sun Life Financial Wealth Sales team.
1 MFS Investing Sentiment Survey, (US), April 2013.
2 Navigating to tomorrow: Serving clients and creating value. PwC, Global Private Banking and Wealth Management Report, June 2013.
3 MFS Investing Sentiment Survey, (US) April 2013.
4 Strategic Insights, January 2018.
5 Vic Preisser and Roy Williams, “The Future of Estate Planning,” Trusts and Estates, June 2010.
6 Strategic Insight, January 2018, projects this wealth transfer will happen from 2016-2026.