Sponsored by Fidelity Investments
Over the next 30 to 40 years, Baby Boomers will pass an estimated $30 trillion in wealth to their heirs. Yet when it comes to having detailed conversations about how these wealth transfers will take place, many Baby Boomers (as well as older retirees) often fail to communicate effectively with their adult children about these sensitive topics.
Fidelity’s 2014 Intra-Family Generational Finance Study* revealed that, while 75% of adult children and their parents agree that it’s important to have frank conversations about wills, estate planning, retirement readiness, and eldercare issues, about four in 10 parents have not had detailed discussions with their adult children. In fact, one in 10 has not had any conversations about the critical topic of wills and estate planning. Moreover, when families do discuss these subjects, the conversations often lack depth. The timing of these conversations is also a cause for misalignment with 64% of parents and their adult children in disagreement about when these conversations should take place. According to the study, parents want to have these discussions after retirement, while their adult children want them earlier.
As a result of avoiding these critical conversations, disagreement exists within families over important topics, according to the study. For example:
- 43% of adult children expect to handle caregiving duties, whereas only 6% of parents expect this to be the case.
- 56% of adult children say their parents often worry about financial security, when only 23% of parents actually do.
Adult children significantly underestimate the value of their parents’ estate – by nearly $300,000
An Opportunity for Advisors to Demonstrate Their Value
Fidelity’s survey results underscore the communications gap that exists between some parents and their adult children on a variety of wealth transfer and eldercare issues. However, they also highlight an opportunity for advisors to demonstrate their value by serving as facilitators of estate planning and wealth transfer conversations. In fact, both parents (61%) and their adult children (57%) in the study report that they are more comfortable talking to a financial advisor than to one another about these sensitive issues.
Intergenerational wealth transfer is an important consideration for the long-term health of any advisory practice. In fact, 7 out of 10 advisors surveyed by Fidelity agree that engaging heirs is critical to the future of their business. While heirs often move inherited assets to their own advisor, Fidelity’s research shows that there may be an opportunity to retain these assets before they are transferred. Only 16% of potential beneficiaries in a 2013 Fidelity study were opposed to receiving guidance regarding their inheritance from the benefactor’s advisor.
While most advisors agree that building relationships with the heirs of current clients is becoming more important, Fidelity’s research showed that only 28% currently offer these services as part of their core offering.2 These services include educating clients’ heirs on how to manage wealth, the tax implications of inheriting (and passing on) assets, and other estate planning services.
Providing intergenerational wealth transfer as a core offering may help advisory firms forge deeper relationships with clients and their extended families. Fidelity’s research shows that advisors who offer these services are more likely to report “knowing almost everything about their client’s financial situation as well as their personal life.”2 They also typically have higher average AUM and higher compensation than advisors that do not have intergenerational wealth transfer as a core offering.2
Meanwhile, clients who get this type of help from an advisor report: a better understanding of the tax consequences of passing on wealth, more knowledge about the process of transferring wealth to their heirs, and more confidence that their heirs will use the inherited wealth wisely.3
Broaching the Topic With Your Clients
One of the first steps to incorporating intergenerational wealth transfer strategies into your practice is to consider speaking with your clients about involving their adult children in financial planning discussions. This can be challenging, as families may not want to speak about end-of-life issues.
While intergenerational wealth transfer offers a great opportunity for advisors to help their clients and grow their advisory relationships, getting the conversation started can be challenging.
Fidelity research shows that some clients are reluctant to involve heirs in the planning process. Nearly half (48%) of advisors surveyed said that this was a main obstacle to providing these services.2 Many (42%) also cited a lack of communication between benefactors and beneficiaries as a primary obstacle.2
One way to broach the subject is to share Fidelity’s research on this topic with your clients. Assuming your clients are ready to have a family financial discussion, consider these suggestions for guiding the dialogue:
- Encourage clients to initiate family discussions early. Generally, the earlier and the more detailed conversations are, the greater the sense of preparedness.
- Help clients identify their core values. Find out what your clients want to achieve with their wealth, how they envision their future, and the type of life they want for their children and heirs. You may also want to explore whether it makes sense for the parents to establish trusts for their adult children or grandchildren.
- Help clients ensure they have the right people talking about the right things, at the right time, in the right way. Define roles, determine what conversations to have, and choose when and how different people will be involved. Consider the personalities of each adult child, their proximity, their relationship with their parents, and other nuances that play into long-term decision-making and financial planning.
- Follow the “voice not vote” rule. While all family members should have a role in the planning process, decisions should be consistent with the wishes of the parents or benefactors.
- Commit to follow-up conversations to keep the dialogue going. Schedule as many get-togethers as needed and revisit plans periodically to make sure they still make sense.
Most people don’t enjoy thinking about, let alone discussing, end-of-life financial and health issues. You can play an important role in helping your clients overcome their reluctance to confront these issues by encouraging your clients to communicate clearly with their families.
Making intergenerational wealth transfer a core part of your offering may not only bring about greater peace of mind for your clients, but it may also help you establish lasting relationships with your clients’ adult children and potentially grow your assets under management.
You may also be interested in:
- Recruiting Redefined
- Take the Quiz: Perspectives on the looming advisor talent shortage
- 2013 Fidelity® Millionaire Outlook Executive Summary: Gen X/Y Millionaires Not Sitting Idle
 Accenture Wealth and Asset Management Services Point of View: The “Greater” Wealth Transfer-Capitalizing on the Intergenerational Shift in Wealth, 2012
 2013 Fidelity Advisor Insights study, previously named Broker and Advisor Sentiment Index, was an online, blind survey (Fidelity not identified) fielded during the period of August 8–21, 2013. Participants included 813 advisors from across multiple firm types who work primarily with individual investors and manage a minimum of $10 million in individual or household investable assets. Bellomy Research, an independent third-party research firm not affiliated with Fidelity Investments, conducted the study.
 Fidelity Insights on Advice — Affluent Investor Insights was an online, blind study (Fidelity not identified) conducted by Bellomy Research, an independent firm not affiliated with Fidelity Investments, from May 16, 2013, to May 29, 2013. It was focused on understanding investors’ attitudes, behaviors, and preferences related to investing, wealth management, and advice usage. It was held among a target sample of 813 respondents, and lasted approximately 30 minutes.
For investment professional use only. Not for distribution to the public as sales material in any form.
*Fidelity’s 2014 Intra-Family Finance Generational study was conducted online among U.S. parents and their adult children by a third-party research firm during the period of March 3 – April 9, 2014. To qualify, parents had to be at least 55 years of age, have an adult child older than 30 and have investable assets of at least $100,000. Their children qualified if they were at least 30 years of age, had at least $10,000 saved in an IRA, 401(k) or other investment account. The total sample recruited for this study included 1058 parents and 159 adult children.
The information contained herein is as of the date of its publication is subject to change, and general in nature. Such information is provided for informational purposes only and should not be considered advice. Fidelity does not provide advice of any kind. This information is not individualized and is not intended to serve as the primary or sole basis for your decisions as there may be other factors you should consider.
Third party marks are the property of their respective owners; all other marks are the property of FMR LLC.
Fidelity Institutional Wealth Services provides brokerage products and services and is a division of Fidelity Brokerage Services LLC. National Financial is a division of National Financial Services LLC through which clearing, custody and other brokerage services may be provided. Both members NYSE, SIPC. 200 Seaport Boulevard, Z2B1, Boston, MA 02210
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