A massive wealth transfer is on the horizon, with over $120 trillion expected to be inherited over the next quarter-century. But here's where it gets controversial: most of these heirs won't be sticking with their parents' wealth advisors.
According to Cerulli Associates, only a small fraction of future beneficiaries plan to continue with their benefactor's financial guidance. The survey, which focused on investors with substantial assets, revealed that just 27% of those who haven't yet inherited intend to do so, dropping to 20% for those who already have.
So, why the disconnect? It's not as simple as heirs wanting to go it alone. In fact, the majority of heirs who choose an alternative route already have their own trusted advisor. For others, it's about building their own relationships, with 28% citing a lack of connection with their parents' advisor as the reason for seeking a new one.
"When parents pass away in their 70s or 80s, their children are often in their 40s or 60s, and they've already established their own financial management practices," explains John McKenna, a research analyst at Cerulli.
And here's the part most people miss: it's not just about the heirs. Benefactors, too, often have mixed feelings about their heirs using the same advisors. While they may be satisfied with their own services, many are ambivalent about whether their heirs should continue the relationship. Only a quarter wish their heirs would keep the advisor, with the majority leaving the decision up to their beneficiaries or expressing uncertainty.
The crux of the issue, according to Scott Smith, senior director at Cerulli, is a reluctance to discuss estate plans within families. Even among the ultra-wealthy, a significant number intend for their heirs to learn about their wealth only after their death.
"Benefactors believe they'll have these conversations before they pass, but when we ask the next generation, we find that these discussions often don't happen," Smith says.
This lack of communication leaves advisors with limited opportunities to connect with the next generation and showcase their value. It's a challenge that advisors must navigate, encouraging clients to have those difficult conversations early on.
"It's not just about retaining assets; it's about making it easier for your survivor when the time comes," Smith emphasizes.
So, what's your take? Are you an heir who's continued with your parents' advisor, or did you choose a different path? And for the advisors out there, how do you navigate these sensitive conversations with your clients? We'd love to hear your thoughts in the comments!
