There are relationships outside of the family that extend from one generation to the next. In much the same way attorneys and accountants can find themselves working with the children or grandchildren of their first clients, so too can financial advisors end up working with multiple generations of the same family.
When a client is satisfied with the performance of a financial advisor, it seems natural for that client to suggest to their children or grandchildren that they also work with the same advisor. With that possibility in mind, it makes sense to create a relationship between the advisor and the investor’s children so that there is a comfort level when the child is ready to begin investing money.
The question is when to make the initial introduction.
Spectrem’s study on communication tackled that issue. In Effective Communication Techniques: Attracting and Retaining Current and Next Generation Clients, investors were asked whether they felt there was a correct or proper age at which to introduce their children or grandchildren to their financial advisor.
“This information is helpful to advisors who know their client has a strong family background and would possibly want to extend the relationship to future generations,’’ said Spectrem president George H. Walper Jr. “Knowing how investors feel about timing introductions can assist advisors in suggesting that such a meeting might take place.”
The overall opinion of investors in the study is that children need to be adults to make an effective introduction to an advisor. Asked of investors with at least $1 million in net worth up to $25 million, more than half of investors said the introduction should come after the child turns 18 at the earliest. More than 20 percent of all investors said the introduction should not come until the child is at least 25 years old.
Obviously, those responses relate to the effectiveness of the introduction. Adult children might actually have funds they want to see grow, and the introduction might actually lead to new business immediately. Even if it doesn’t, it puts the idea to mind, and the adult children can start thinking about what they want to happen to their money in the near future and beyond.
“They all know him,’’ said one investor interviewed directly in the qualitative portion of the study. “My older one actually uses him. My 23-year-old has been questioning my husband and me, so I would have no problem if she wants to talk to him.”
“It’s very important,’’ another investor said. “(The child) has to understand the value of things. It’s a very important part of life, so the younger they start the better.”
There are investors who believe introductions should come prior to an 18th birthday, and more than half of Millennial Millionaires think a child should be introduced to the family’s financial advisor before the child turns 12. While that will create a sense of familiarity, the child is not likely to understand the role of the advisor at that age.
On the other side of the coin, approximately 20 percent of investors do not think there is a “correct’’ age at which a child should be introduced to a financial advisor.
The issue only really matters when a child loses his or her parents and has no direction to go financially.
“My parents passed away when I was young,’’ said one investor, who started using a family accountant thereafter. “It would have been nice to have been told sooner.”
Top Takeaways for Advisors
A client’s children or grandchildren should not be viewed as future clients. If that happens, great, but advisors should view the offspring of clients as factors in any investor decision. The affect a child has on an investor changes as the child ages, and advisors need to keep up with a client’s family dynamic.
However, if a client feels the need to introduce his or her children to an advisor, the advisor should consider that meeting as a significant moment. If something happens to the investor, that child will be in need of advice, and having even an initial introduction will make future conversations easier. At the same time, any client child certainly could become a future client themselves, and advisors have a step forward because a relationship already exists.
*According to Spectrem research, there are currently 29.8 million households with $100,000 - $1 million in net worth (not including primary residence, NIPR). There are 9.1 Millionaire households ($1 million - $5 million net worth, NIPR), 1.21 million Ultra High Net Worth households ($5 million - $25 million net worth, NIPR) and 145,000 households with more than $25 million in net worth, NIPR.
©2017 Spectrem Group