Few heirs keep their parents’ wealth advisors, Cerulli study finds

The transfer of wealth from one generation to the next is a significant event that can have a profound impact on families and their financial advisors. According to a report by Cerulli Associates, over $120 trillion in wealth will be passed down to inheritors over the next 25 years. However, the majority of these future beneficiaries, primarily widows and children, do not plan to retain their benefactor’s wealth advisor.

Only 27% of those surveyed plan to keep their benefactor’s wealth advisor, while 20% of those who have already inherited their wealth have chosen to work with a different advisor. The reasons for this are varied, but the most common explanation is that they already have their own advisor. Other reasons include not having a relationship with their benefactor’s advisor and not wanting to work with a financial advisor at all.

Understanding the Needs of Inheritors

It’s essential to understand that inheritors are not typically young people who are new to wealth management. Many are between 40 and 60 years old and have already established relationships with their own financial advisors. As a result, they are more likely to add their inherited wealth to their existing relationships rather than starting a new one with their benefactor’s advisor.

Research analyst John McKenna notes that “in most of these cases, they have matured into wealth management clients. They have relationships, and they’re just going to be adding incrementally to their existing relationships rather than starting a new one with a legacy advisor.” This highlights the importance of understanding the needs and preferences of inheritors and being prepared to adapt to their existing relationships and financial plans.

Communicating with Benefactors and Inheritors

One of the primary challenges in this process is the reluctance of benefactors to discuss their estate plans with their families. According to Cerulli, 20% of investors with more than $5 million in financial assets intend for their heirs to learn about their wealth after their death. This can lead to a lack of communication and understanding between benefactors and inheritors, making it difficult for advisors to establish relationships with the next generation.

Scott Smith, senior director of advice relationships at Cerulli, emphasizes the importance of encouraging benefactors to have open and honest discussions with their families about their estate plans. By doing so, advisors can help establish a smoother transition of wealth and ensure that inheritors are better prepared to manage their inherited assets.

Building Relationships with Inheritors

Advisors can play a critical role in facilitating these conversations and establishing relationships with inheritors. By reinforcing the importance of involving the next generation in estate planning discussions, advisors can help ensure that inheritors are better equipped to manage their inherited wealth. This not only helps to retain assets but also makes the transition process easier and less stressful for all parties involved.

Ultimately, the transfer of wealth from one generation to the next requires careful planning, communication, and relationship-building. By understanding the needs and preferences of inheritors and encouraging open and honest discussions between benefactors and their families, advisors can help ensure a smoother transition of wealth and provide valuable guidance and support to the next generation of wealth holders.