Financial Advisers Confront the Needs of Younger Family Clients

As baby boomers give up control of the family finances, financial advisers must find ways to connect with millennials and Gen Xers.


As the baby boomers age into retirement, managers of multigenerational wealth won’t find their jobs any easier. For starters, they may have to forge ties with family clients all over again. Richard Stone, founder and chairman of Private Ocean, a San Rafael, California–based firm overseeing nearly $900 million in assets, has spotted a trend: heirs abandoning their parents’ investment strategies and advisers. “As a wealth management firm that is counting on multigenerational relationships, how do you position yourself to make sure that you’re the adviser for that new generation?” Stone asks. “That’s a big, big theme right now in the industry.”

Managers must also convince current family heads that it’s time to begin ceding some power to the kids. “The boomers don’t like to admit that they are getting older, and they don’t like the idea of giving up control,” says Beth Landin, who oversees client relationships for Market Street Trust Co., a Corning, New York–based multifamily office with more than $1 billion under management.

Boomer households — those between ages 49 and 68 — accounted for some 60 percent of the $13 trillion in assets overseen by U.S. mutual fund managers in 2012, industry group Investment Company Institute reports. But members of the generation born after World War II have often delayed making necessary plans and broaching unpleasant topics such as diminished physical and mental capacity later in life, according to Landin. Market Street isn’t afraid to raise those questions with clients. “We speak with our families about every aspect of the process, from preparing ahead for in-home medical care to deciding which child will be the point person for making financial decisions and which one will handle parental care needs,” Landin says.

The age of clients when they inherit wealth will have a big impact on managers’ ability to maintain ties with families, experts note. Aged 18 to 29, millennial clients have a different attitude than their older, Generation X counterparts. “While Gen X members tend to be more skeptical of financial advisers, the good news is that millennials may be easier to retain as clients,” says Kim Lear, a researcher with BridgeWorks, a Minneapolis-based consulting firm that helps investment firms and other businesses manage multigenerational communication internally and with clients. BridgeWorks’ research suggests that parental opinions have a greater influence on millennials than on prior generations, so an adviser can build lasting bonds with young family members by having them join meetings with Mom and Dad. “If they see that you have their parents’ confidence, that will go a long way with that generation,” Lear explains.

Retaining millennials as clients may be relatively easy, but these children of so-called helicopter parents require different services than other age groups. In wealth manager Stone’s experience, millennial and Generation X clients often lack their predecessors’ appetite for investment risk. Both cohorts may be risk-averse partly because they enjoy less professional stability than their parents did, he notes.“One of my clients worked at the same company for 40 years and retired,” Stone says. “That’s unheard of today.”

Market Street’s Landin has instructed team members to text younger clients when they’re unresponsive to other forms of communication. Managing expectations for people in their 20s can be difficult, she acknowledges. “Having grown up with access to rapid technology innovation, they tend to expect immediate gratification,” Landin says. “Where their parents’ generation might expect us to be able to answer a complex question within a week, they ask if you can respond by tomorrow.” New technology can help put younger clients at ease. In recent years major custodian banks have overhauled the web and mobile interfaces they provide to investment firms so clients of different ages can access information in the way that suits them best — by smartphone, for example, rather than waiting for a monthly statement.

As wealth managers strive to keep family clients, it doesn’t help that their industry is among the least prepared for baby boomers to leave the job market. More than a third of all U.S. financial advisers are less than a decade away from retirement, according to a 2013 report by financial services firm Pershing, a subsidiary of Bank of New York Mellon Corp. Over the next ten years, firms will have to find 237,000 new advisers, the authors project. For those with senior management preparing to depart, it may be too late to inject new blood, given the time required to train staff and introduce them to the client base. M&A advisory firms have cited this lack of succession planning as a catalyst for recent industry consolidation. “Very tough decisions are being made that run the gamut from literally turning out the lights and locking the door to selling out to a larger third-party firm,” says Private Ocean’s Stone. • •