According to Cerulli Associates, high-net-worth (HNW) households control close to 35% of all investable assets in the U.S. marketplace. Advisors surveyed by Cerulli were asked about the depth of their relationships with the potential inheritors of their HNW clients’ assets. While responses about the relationships with spouses were encouraging, advisor relationships with younger generations of the family are a large concern.
“The notion of helping a family define and accomplish their aspirations without involving spouses is irrational,” says Donnie Ethier, associate director at Cerulli. “The thought of referring to spouses as ‘heirs’ is not a welcoming idea, but many practices may have to approach it in this manner due to the generally limited rapport with family members.”
The study U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2016: Understanding the Long-Term Impact of Wealth Transfer reveals that 67% of HNW households are led by investors age 60 or older. “Overlooking the children of these investors is ill-advised as most are not adolescents, but adults well into their 30s and older, with their own financial habits, philosophies, and possibly established advisor relationships,” explains Ethier. “How and where the younger generations manage assets or inheritances represents a pivotal transformation, as these wealth transfers will likely determine who the future leading firms and channels become.”
As the industry continues to evolve toward a more transparent, goals-based approach to investing, practices will need to adjust to the new expectations of clients by offering a collaborative advisory model with a broader range of products and services. “We believe that wirehouses and private banks will adapt, while registered investment advisors and multi-family offices stand to capitalize,” states Ethier.