TLDR:
Engaging the entire family is crucial for advisors to build trust, retain accounts, and create long-term value. To achieve this, advisors should develop a comprehensive family engagement plan that goes beyond traditional KYC questions. Understanding financial assets, retirement plans, lifestyle aspirations, and other relevant information about each family member is essential. Advisors should recognize and address differences of opinion impartially, facilitating discussions and finding common ground. Engaging the non-involved spouse is crucial to prevent attrition in case of the primary account holder’s death. Advisors should make themselves available, explain decisions without jargon, and emphasize the benefits of involvement. Including adult children in the planning process is also essential, as a significant wealth transfer will occur in the coming years. Advisors should meet regularly with adult children and offer education on financial planning tailored to their needs. By prioritizing family engagement, advisors can ensure the long-term success and retention of both current and future generations of clients.
A family is more than just one person.
Much has been written about the need for advisors to engage a broader range of family members beyond the primary account holder to minimize account attrition. However, building a trusted web of relationships across families at the outset can immediately unlock a network of near-term opportunities, deepen trust, and create a network effect of value for your clients and practice today and tomorrow.
Building a rapport with the entire family will benefit both the advisor and the family. Most families have interrelated goals that cross generations, requiring outreach to all involved relatives. You may encounter hesitancy or resistance from family members unwilling to speak with you about the planning process.
Below, we have outlined 4 key ways to establish rapport and demonstrate the value of their participation in a conversation that will create a complete wealth management plan and provide the basis for ongoing advice that helps them meet their financial goals.
Develop a Family Engagement Plan
Know Your Customer (KYC) questions alone need to be more comprehensive in comprehending the intricate personalities of clients and their families, as they were not originally designed to capture such detailed information. To gain a deeper understanding, we suggest that firms establish comprehensive engagement plans that encompass strategies for effectively communicating with the non-financial spouse, typically the wife, although assumptions should be avoided. According to InvestmentNews, 40% of advisors primarily or exclusively communicate with one spouse. Seasoned advisors with over 20 years of experience are more likely to maintain balanced communication with both spouses.
As an industry, we can and must do better. In addition, to Know Your Customer (KYC) and a firm understanding of investments and assets, your engagement plan should also include data on the following topics:
• Information on the total financial assets of both spouses, including qualified and nonqualified accounts held elsewhere.
• 529 or other education savings plans held elsewhere, if applicable.
• How your client and their spouse plan to retire, including when and where (for tax considerations).
• Lifestyle aspirations such as a 2nd home or entrepreneurial ventures.
• Philanthropic interests/board memberships.
• Contact information, children or grandchildren’s ages, and educational aspirations.
• Extended family considerations such as elder care, role as executor, or financial power of attorney for other family members.
• Information on any trusts created by the client or their spouse.
• Guidance from the client on their final wishes regarding finances and assets.
Some of these questions are challenging or uncomfortable, but having these conversations now is better. With everyone taking an active role, there will also be fewer surprises down the road, both for you and your client. This comprehensive knowledge will significantly enhance the advisor’s ability to effectively plan for the full relationship around goals, make critical decisions, and navigate tradeoffs with a deep understanding of their implications. It empowers the advisor to provide tailored support to the client, ensuring their financial journey aligns with their long-term objectives and minimizing unforeseen obstacles.
Recognize and Acknowledge Differences
Sometimes there are differences of opinion, but often these discussions surface more foundational divergences of priorities, financial discipline, or values. It’s essential to facilitate these discussions with impartiality and stay focused on outlining the decisions to be made, allowing family members time to discuss privately to arrive at an agreed path forward.
Lean on your experience when guiding families to the best course of action. They’ve hired you for this expertise, and it’s your job to communicate this to make everyone feel like they’ve been heard.
On discussions of high importance to the entire family, encourage your client to organize meetings where everyone is present; video conferencing allows this to be scheduled and planned more easily than ever before. Doing this will ensure that spouses and children feel included in these decisions and get the correct information.
Please think of the old playground game whisper down the Lane: it’s easy for a message to change or be misconstrued as it passes from person to person. With everyone at the table, you know everyone involved is on the same page.
Another technique is looking for commonalities before diving into more contentious topics. Perhaps the family is involved in charitable work. By planning this part of the family’s finances first, where everyone agrees, they’ll be more willing to compromise on areas where they’re further apart.
You are the expert here and can develop a solid plan using the information from one spouse. However, it’s human nature to put your wishes first, so there might be better courses of action for the family. Look at these differences as something other than an opportunity to develop a richer and more comprehensive plan that may help guide future generations.
Engage the Non-Involved Spouse
While we’ve urged you to involve everyone as much as possible, there will be situations where one spouse wants nothing to do with the process. Advisors back off far too often, focusing on the engaged spouse instead.
This is the wrong approach and will lead to trouble later on. InvestmentNews and CateretGrant found that as many as 70% of widows leave their advisor upon the spouse’s death, likely due to the surviving spouse having little (if any) relationship with the advisor.
A common reason for disinterest is a need for more understanding or deferral of those decisions to the engaged spouse. In this case, advisors should make themselves available to answer questions at any time, and when answering those questions, try to avoid jargon and technical explanations. Make a case or example of why a non-engaged spouse might want to engage. Should something happen, offer some value in education, a glossary, or the benefit of knowing and understanding their loved ones’ plans and wishes.
Going back to the questions we recommended you ask in developing your engagement plan, those frank discussions on retirement and final wishes are an excellent opportunity to establish a line of communication with less-engaged people.
You will be thankful for this work later if your client passes before their spouse, as it gives you a much better chance of retaining the family’s business and provides the
opportunity for you, as a trusted adviser, to be helpful to a surviving spouse in their time of greatest need.
Include Adult Children in the Process
Finally, we recommend having a strategy for communicating with multi-generational families. Over the next few decades, a staggering $68 trillion in wealth will be passed from Baby Boomers and Gen Z to Millennials.
This doesn’t mean you’re entitled to their business. Adult children act similarly to the unengaged spouse upon the death of their parents, as an estimated two-thirds fire their parent’s advisor when they’re in control of their parent’s assets. This percentage drops significantly if the children are involved in the planning process.
InvestmentNews found that roughly half of all advisors meet with adult children less than once a year, with an additional one in five not meeting with adult children. The poor retention rate of accounts that have been passed on to adult children is likely explained by this statistic.
Given the position Millennials find themselves in, advisors are missing a golden opportunity. This generation is in dire need of your services: they are burdened by student loans and are the most likely to say their financial situation is holding them back, according to data from Morning Consult.
But this study also showed that Millennials are the most likely generation to work towards a financial goal. We recommend that advisors provide education on options and alternatives to this commonly encountered situation and offer services attractive to this demographic.
For example, you might offer your Baby Boomer or Generation X client and their spouse detailed financial planning but provide financial education services for younger family members to learn good money management, college planning, or how to deal with student loan debt.
How you handle this is up to you, but getting to know your client’s adult children and catering your business to their current needs sets you up to manage your client and their family’s finances for years to come.
Final Thoughts
Advisors are generally doing a good job communicating with their clients. However, the industry needs to share more with the client’s broader family, especially when making decisions that affect more than just the primary point of contact.
With non-involved spouses and adult children firing their advisors following the passing of the primary family member the advisor dealt with more often than not, this should be a priority.
The good news is that this is easy to do since it involves more of a change of strategy than a significant amount of additional work. But it would be best to start changing how you interact with your client’s family – as your bottom line (and the future of your relationship with them) depends on it.
Disclosures
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal, or tax advice.