Cultivating Future Clients: Engagement Strategies for the Great Wealth Transfer

Highlights: 

• Financial institutions should actively cultivate relationships with family members before wealth transfer occurs by offering value-added services, such as Personal Financial Management (PFM) tools and caretaker support, to create a positive, frictionless experience.

• To prevent asset leakage, firms must couple digital solutions with direct advisor access, ensuring that initial engagements establish goodwill and demonstrate tangible value to the next generation of account holders.

In my last blog article, I talked about the generational wealth transfer of $70 to $100 million that will happen over the next 20 years and the power of proactive relationship mapping to determine who is mostly likely to inherit this wealth.  I also discussed the concern financial institutions have that as many as 70% of these heirs will transfer assets to other providers. 

What can financial institutions do to proactively prevent this from happening? Not to sound gloomy, but financial institutions need to cultivate these relationships while the accountholder is still alive. The accountholder not only serves as the reason for a financial institution to reach out - the bridge or connection to the individual - but also can be a valuable ally in creating a relationship that can grow into a direct connection.

Probably the most critical step in the entire process is to engage the family member with compelling services. Financial institutions must provide the individual with a positive experience from the start, limiting friction and avoiding the appearance of simply wanting to sell something to the individual. The engagement should focus entirely on a benefit to the individual (which may also benefit the accountholder). 

Examples of potential services to offer to family members include:

• Complimentary Services or Premium Service Levels: Enable the accountholder to gift individuals with premium service levels and plans. Funnel registration of the services through the accountholder’s advisor to provide the advisor with the opportunity to engage the family member.

• Personal Financial Management (PFM) Services: Many wealth management firms are already offering PFM services to their clients. Provide family members with complimentary access to these planning tools. In addition, consider expanding the suite of services to include the needs of these individuals, which may vary from direct clients. For instance, wealthy clients may not need a budgeting application but their children might consider a budget management tool as their primary reason for using a PFM platform. In short, expand the scope of your target market for PFM services to include wealth transfer personas.

• Caretaker Tools: Enable selected family members to seamlessly help manage their loved one’s finances with a frictionless experience. These tools can include account monitoring such as sending alerts when account activity occurs, the ability to transfer funds in between accounts and other functionality that can make these tasks easy to accomplish. To be clear, this is your primary service and relationship with a caregiver, they will evaluate their experience with you based on how well you enable them to efficiently and effectively support their loved one. So your support needs to be robust, and remove friction and hurdles wherever possible. 

While this tool is important, the technology shouldn’t be a stand-alone solution. For more effective engagement, couple it with direct access to the advisor working with the account holder. Start this relationship off on the right foot by making the process of securing account access or Power of Attorney over the account as seamless as possible. Seed your future engagement for success by making this first step as easy as possible. 

These are just a few examples of how to make your firm attractive to a family member. The goal is to create a positive impression with the family member, providing value directly to them regardless of the benefit to the accountholder. Basically, you want to establish goodwill with the family member and show the value you can provide to them with an ongoing relationship. Then, when the unfortunate event of inheriting wealth occurs, you will already have a direct relationship with the accountholder. 

Of course, this is just a start. The generational wealth transfer is a complex event that will take place over the next few decades. The size of the assets under management involved and duration of the event require that financial institutions generate strategies that can endure and evolve as we move through different stages of the transfer. Unfortunately, there’s no quick path to ensure success. Financial institutions will need to invest resources and try different strategies to find what works best with their clients and families to put them in the best position for continuing to manage the client’s assets when that person passes on their wealth.