How Advisers Can Strategize for the Great Wealth Transfer

As the first of 1.1 billion Baby Boomers turn 80 this year and the largest wealth transfer in history enters its early days, advisers are already seeing assets go. One-third of surveyed advisers said they had already lost “substantial” assets due to generational attrition, according to Natixis Investment Managers’ recently published report, “Existential Crisis: Three Factors That Will Determine Who Survives and Thrives in the Great Wealth Transfer.”

The report underscored the need for advisers to rethink how they retain clients during periods of wealth transfer. Advisers estimated they retained assets only about half the time during intergenerational transfers, and 46% of advisers said generational wealth transfers represent an existential threat to their business.

“Advisers in the U.S. appear to be more confident in their ability to retain assets, but 41% still see wealth transfer as an existential threat to their business … Right now, they retain assets about 78% of the time when a spouse inherits and 57% of the time when next generation heirs inherit,” Dave Goodsell, executive director of the Natixis Center for Investor Insight, wrote to PLANADVISER in an email.

Among surveyed investors, 45% said they plan to keep inherited assets with their benefactor’s adviser, while 55% of next-generation heirs said they plan to leave. The most common reason clients gave for staying with their benefactor’s adviser was that they already knew and trusted the adviser (30%) and the adviser handled the benefactor’s money well (23%). Top reasons for those who left included already having their own adviser (29%), not having a connection with their benefactor’s adviser (25%), and a lack of trust (13%).

Advisers seemed to have more success in spousal inheritances, with 72% of surveyed advisers retaining assets. Still, 43% said they worried they would not retain assets in the future after a client’s spouse inherits.

When it came to U.S. advisers, 30% say they are increasingly worried they will not be able to retain assets when a spouse inherits, said Goodsell.

To combat the worry of losing assets, advisers are implementing numerous strategies, demonstrated in the chart above. The retention strategy reported by the most advisers was long-term relationship building with clients’ families (76%). Roughly half said they offer ancillary services such as insurance and additional planning for college, careers, estates or trusts.

Natixis IM’s findings were based on CoreData Research’s global surveys of 7,050 investors and 2,700 advisers, including 750 investors and 300 advisers in the U.S.