Supporting wealth planning
  • November
  • 2022

Supporting Wealth Planning for the Next Generation

Connectivity, Commitment and Confidence: How your firm can support the transfer of wealth planning with the next generation

Over the next decade, between 30 and 68 trillion dollars will be transferred by families to their children. In the UK alone, the estimates are $15.4 million over the next decade, according to a Russell-Cooke study.

Succession planning by wealthy families and family offices is a hot topic in those rarified circles. But for many affluent families, wealth planning has not been priority. According to a report by Russell Investments, only 26% of families have a full strategy on wealth transfer, and once the transfer occurs, 90% of the heirs change advisors. In some countries, such as Switzerland, strict laws prohibiting advisors from contacting the heirs of a deceased client can eliminate communication. Sadly, 70% of families lose control of their assets after the transfer.

Why is the track record so dismal? Some parents are hesitant to pass their estate directly to their heirs, preferring to put assets in trust for grandchildren. Others set strict conditions for their heirs to be able to access their wealth. Succession/wealth planning can involve overcoming family feuds, distance between parents and expatriate children, disputes over property and concerns over multi-jurisdictional tax efficiency. Some children are reluctant to take on the family business or, if the business has been exited, to invest the family wealth effectively. Younger people may view wealth planning as something tedious and boring. In cases where neither the parents (Boomers) nor the children (Millennials) are taking the initiative to engage with their wealth manager or financial advisor, the outcomes can be serious.

How can wealth managers motivate all members of a family to participate in planning for the transfer of wealth to the next generation,while building loyalty in the younger cohort?

Connectivity

For Baby Boomers, the Microsoft Excel spreadsheet is all things to all men (and women). Relatively generic forms of communication are expected and acceptable. Millennials, however, expect digital journeys that are easy to navigate and bespoke: wealth planning offerings should be hyper-personalized. This is a challenge for wealth managers. Data necessary to create portfolio simulations and interactive, holistic wealth experiences may be siloed in different parts of the organization. 

With OutRank®, there’s the ability to create financial simulations with data tested under different scenarios, such as high versus low interest rates, equity valuations, energy prices, etc. Our tool is objective, fact-based and transparent, so clients can test our assumptions and query our processes. For Millennials accustomed to data that is presented in visually interesting, interactive or even gamified manner, a compelling representation of data keeps these clients focused on wealth planning as an iterative process.

Commitment

Boomers may be happy to receive newsletters, fact sheets, or reports downloaded from your firm’s portal. Millennials need to have their data on the fly. Multi-channel communications – including mobile offerings and self-service options – are de rigeur. Do you have to rebuild your systems to suit your new, younger clients? The good answer is “not entirely and not immediately”, you can keep your existing systems in situ and integrate the OutRank® wealth planning API into your tech stack. Your developers can focus on consolidating the data into actionable information for your clients rather than on reinventing the wheel. If required, they would replace only the parts that need replacing.

Confidence

Whether parents are leaving a business, a portfolio of investable assets, property, or liquidity from the exit of a business that needs to be invested, they need to convey their wishes to their children. Equally, the heirs need to understand the intentions of the parents while at the same time infusing the strategy with their own ideas. The whole wealth planning discussion can be daunting and stressful, but it doesn’t need to be. Cash flow modelling helps both generations visualize what is possible with respect to the preservation and growth of the family’s wealth. 

With OutRank®, you can create financial scenarios that are product-agnostic and free from bias. If, for example, the parents have a bias towards fixed income and the children prefer equities, our system can model a variety of outcomes using various risk and return parameters. 

Making Wealth Planning High-Touch and High-Tech

Facilitating difficult conversations is one way that wealth managers can add value to client relationships, to convince the parents to articulate how they prefer their legacy to be invested and to engage the heirs in wealth planning as a lifelong journey. Using relationship skills and technology, you can help both generations to participate in a measured discussion about assumptions, fears, concerns and aspirations for their family’s wealth management strategy.

With OutRank®, we have a track record working with wealth managers and insurers to offer a seamless wealth planning customer experience across all asset classes. Our financial simulation engine offers a unique framework that can be customized for each client of a wealth management firm. 

Digital Transformation: not if, but when

For wealth managers, digital transformation is essential. Per Morgan Stanley and Oliver Wyman, a $230 billion untapped revenue opportunity in the lower HNWI and affluent segments is overlooked by wealth managers who invest in tech only for the top end UHNWI segment. Investing in the right technology solves three issues: retaining the original clients who built the wealth, attracting the next generation and retaining them for years, and converting these new clients to advocates who will refer their friends and colleagues to your firm. It’s that simple. Prospects who come to your firm via client referrals are much more likely to become lifetime wealth planning clients.

Millennials use social media to communicate their buyer behaviour and customer satisfaction or dissatisfaction. So by making one affluent wealth customer happy, you can potentially access a large ecosystem of that person’s social network.

Action

Are you looking to capitalize on the Great Wealth Transfer? Data is everywhere and even sophisticated investors can become overwhelmed with information. Therefore, if your firm can convert data to actionable information, you can differentiate yourself and establish a unique wealth planning offering in the market. 

If you’re a wealth management advisor, have a look at Kidbrooke’s OutRank and learn how your clients can benefit from our technology. We believe that data can bring families together to preserve their wealth.

To learn more about how Kidbrooke® can help you achieve your business goals, please get in touch.

www.kidbrooke.com

Sources:

https://www.mckinsey.com/industries/financial-services/our-insights/analytics-transformation-in-wealth-management

https://www.mondaq.com/uk/wealth-asset-management/1149784/generation-game--the-great-wealth-transfer-and-the-outlook-for-families-in-2021-and-beyond-

https://russellinvestments.com/uk/blog/intergenerational-wealth

https://www.oliverwyman.com/our-expertise/insights/2021/jun/competing-for-growth.html

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