Nearly 90% of U.S. Inheritors Don’t Even Consider Using Their Parents’ Advisor


Nearly 90% of U.S. Inheritors Don’t Even Consider Using Their Parents’ Advisor

Advisors need a wake-up call to capture the next generation of wealth

May 2019, BOSTON - Retention of inheritors’ assets can be a major contributor to a firm’s ongoing success, but only 13% of affluent investors report that they choose to work with the same advisor whom their parents used. New research from Cerulli Associates, a global research and consulting firm, finds that of the remaining 87% of investors who report not using their parents’ advisor, 88% of them indicate that they had never even considered doing so.

The importance of reaching out to potential inheritors early and often is critical if an advisory practice hopes to maintain assets through a wealth transition. “By expanding its network to encompass the next generation, the practice not only increases its retention opportunity at the point of wealth transfer, but also creates the potential for referrals from the heirs whose peers may have assets in transition as they move between jobs in their careers,” explains Scott Smith, director at Cerulli. “While each of these interactions may not lead to immediate asset flows, building a pipeline of affluent advice seekers is an excellent opportunity to secure future clients.”

Advisors in good stead with investors’ heirs prior to a wealth transfer event are more likely to retain their assets. “By waiting to work with clients’ children until after a wealth transfer event, advisors greatly diminish their likelihood of retaining the assets,” states Smith. When respondents who received an inheritance were asked what they did with their funds upon receiving them, 20% of recipients indicate that they maintain a relationship with the same firm, while 36% moved the assets to be managed with the rest of their portfolio, and an additional 19% moved to a new advisor or to a robo-advisor platform.

These results highlight near-term opportunities for advisors to capture growth with a business development strategy focused on engaging investors’ heirs. “While these investors may not currently fit the practice’s targeted client profile, there is a very high correlation in wealth outcomes among successive generations,” says Smith. “By combining personalized advice at periods of crucial need with digital advice tools, practices can substantially increase their ability to both retain current assets and attract new flows among the emerging wealth segment.”

Cerulli’s second quarter 2019 issue of The Cerulli Edge—U.S. Retail Investor Edition examines the experiences, behaviors, and intentions of both inheritance recipients and investors hoping to pass on their accumulated wealth. By better understanding these dynamics, providers can design long-term strategies to improve their success in retaining next-generation clients.

These findings and more are from: The Cerulli Edge—U.S. Retail Investor Edition, 2Q 2019 Issue.

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