Winning the Great Wealth Transfer: The Power of Proactive Relationship Mapping

Highlights: 

• The $70-$100 trillion Great Wealth Transfer represents a critical dual threat and opportunity for financial institutions, necessitating a move toward long-term, multi-pronged relationship strategies rather than simple account management.
• Success hinges on leveraging multi-source data—including self-reporting, beneficiary designations, and credit header data—to map complex household relationships, prioritizing spouse and adult children tiers to effectively limit asset attrition.

In my previous blog, I discussed the much anticipated, historical generational wealth transfer that will occur over the next 20 years. Estimates for the actual amount of money that will transfer to new owners varies, but generally ranges from $70 trillion to more than $100 trillion.

Of course, for financial institutions (FIs) this event is both a threat and opportunity. As a threat, FIs are concerned that heirs will transfer assets to other providers. In fact, some survey-based studies have found that 70% of potential heirs intend to move inherited assets to another firm. As an opportunity, FIs hope to develop relationships with heirs, with the potential double benefit of continuing to manage the inherited assets and growing assets under management if these new customers transfer their own portfolios to the firm. The size of the amount of money involved and dual nature of the wealth transfer requires that FI marketers take action now to limit attrition and maximize growth.

Unfortunately, there is no single, simple path to success. Instead, FIs need to craft a multi-pronged, long-term strategy, treating this as a stand-alone market that has its own characteristics and requires the appropriate investment and resources in order to be successful. 

In particular, consumer segments in the wealth transfer market have different needs than traditional wealth clients which require firms to develop new engagement strategies and products to meet each segment’s specific needs. In fact, understanding customer needs is always a good place to begin crafting a successful strategy so let’s start there. 

In general, the household unit is the best level to focus marketing efforts. This is even more critical with wealth transfer as in most cases heirs are a part of the asset-owner’s household. So being able to map out a customer’s household and understanding each member’s role in its financial activities is not simply a nice-to-have. Without this understanding, FIs risk assets attriting as other household members who have relationships with other firms become the primary accountholders.

Having said that, mapping family or household relationships is not an easy task. Here are immediate family members that could likely be part of a household. Of course, there will be variations on this structure, but one can safely assume that this will be the typical set of family relationships to map out: 

• Head of Household

• Head of Household Spouse

• Adult Children

• Adult Children Spouses

• Children under 18 years old

• Grandchildren  

Beyond family relationships, there are two additional important relationships to consider:

• Key Colleagues

• Business Managers

A Key Colleague is any individual outside of the person’s family relationship, such as a very close friend, who has a tight relationship with the accountholder and may wield significant influence over their life decisions. Especially for accountholders with no immediate family, key colleagues can be the primary recipients of an estate. 

Business Managers are people who have a formal relationship with the accountholder such as a personal attorney or tax professional. While accountholders may entrust Business Managers with significant decisions, and they may exert considerable  influence over the accountholder, it’s not likely that they will be named as primary inheritors of the accountholder’s estate. 

Unfortunately, identifying the boxes that need to be filled with names is the easy step. Putting names and contact information into each of those boxes is the more difficult step. There’s no one method to capture all of the relationships and names. Instead, firms will need to employ a patchwork strategy with overlapping techniques to capture as many of the names as possible.

As a result, FIs will need to consider a number of sources to include in these efforts, including:

• Self Reporting: Probably the most obvious and direct option is to request family relationship information during account onboarding and periodic account reviews. Firms must consider balancing trying to capture all of the accountholder’s family relationships with not appearing obtrusive or introducing friction into the account relationship by asking too many questions about family ties. A best practice is to tie the request to an immediate, tangible benefit such as leveraging the information to pre-register family members for a product or service that the family member finds attractive. More on this in the next section.

• Beneficiary Designations: Leverage primary and secondary beneficiary designations to identify family relationships. Due to its importance, this data should be very accurate, of high quality  with no missing information or errors, but it will be limited in scope, and as wealth increases more often than not beneficiaries may be trusts versus individuals.

• Consumer Lists: Consumer lists and similar commercial databases of U.S. consumers provide names and other identity information but they can be of varying quality. The databases are typically used for general marketing purposes where not correctly capturing a relationship has relatively minor implications. As a result, Consumer Lists should be used with some caution when trying to map out family relationships. A sound strategy is to leverage them as a secondary source, or to use several Consumer Lists to find where individuals are listed with the same information across several databases.

• Regulated Data Sources: Since wealth management firms maintain a fiduciary relationship with their clients, they can leverage data that is more heavily regulated than Consumer Lists such as credit header data to identify likely family relationships. Credit header data is of a much higher quality than Consumer Lists but there are limitations on how it can be used.

Employing all of these techniques likely won’t result in identifying all family relationships with a high-level of confidence, but they are table-stakes in the process. FIs will need to be flexible in balancing breadth and quality in their mapping, meaning they will need to evaluate the need to identify all relationships - to have a completely filled family map - against making sure they focus on finding identities for the most important relationships. For instance, while it’s important to identify the accountholder’s grandchildren for future opportunities, the immediate need to secure passed-on/inherited assets in the next 5-10 years requires firms to focus on spousal and children relationships first. Firms should prioritize getting these relationships recorded correctly and then secondarily focus on additional family relationships. In fact, the relationships could be grouped into priority tiers to ensure resources are focused on the most important relationships:

• Tier 1

  • Head of Household

  • Head of Household Spouse

  • Adult Children

• Tier 2

  • Children under 18 years old

  • Grandchildren

  • Key Colleagues

  • Business Managers

• Tier 3

  • Children under 18 years old

  • Grandchildren

Further, as FIs become more familiar with the resources they employ to map family relationships, they can introduce confidence metrics that value the quality of the different data capture sources and techniques. This could take several forms, including trusting specific sources with high confidence - no further confirmation needed - while other sources require additional confirmation to move beyond a confidence value of “suspect.”

For instance, identifying a family relationship through the person being designated a beneficiary may have a high confidence value, requiring no further validation. However, identifying a potential family relationship through a Consumer List may require being confirmed by one or more secondary sources before being considered as accurate enough to act on.

To be clear, once family relationships are mapped out, the work is not done. On the contrary, this enables the real work to begin.