What's Happening?
Protective Life Corporation, a U.S. subsidiary of Daiichi Life Group, Inc., has released new research examining how financial professionals can retain client relationships during the 'Great Wealth Transfer.' The study, conducted in partnership with Greenwald
Research, focuses on the long-term shift of assets from older generations to spouses, adult children, and other beneficiaries. The research identifies two periods when client relationships are particularly vulnerable: after the death of the more financially engaged spouse or partner, and when assets are ultimately transferred to heirs. A significant finding indicates that while 77% of future inheritors already work with a financial professional, only 6% use the same professional as the person from whom they expect to inherit, suggesting a substantial continuity challenge for financial firms. The study also found discrepancies between inheritors' expectations and bequestors' planning, with many planning measures remaining incomplete.
Why It's Important?
This research is critically important for the U.S. financial services industry, as it highlights a significant risk to client retention and asset management during the ongoing 'Great Wealth Transfer.' The findings suggest that financial professionals and firms could lose a substantial portion of their client base and assets as wealth transitions to the next generation, who often have their own established financial advisors. This poses a direct threat to the long-term stability and growth of wealth management firms, potentially leading to decreased assets under management and revenue. For clients, the lack of continuity in financial advice can result in suboptimal wealth transfer strategies, potential family conflicts over inheritance, and missed opportunities for comprehensive financial planning. The study underscores the urgent need for financial professionals to proactively engage with multiple generations within client families to build relationships and ensure a smoother transition of wealth and advisory services.
What's Next?
Protective's research suggests that financial professionals need to adopt new strategies to address the identified relationship risks. The company has developed a whitepaper, 'The Two Moments That Matter: Financial Professional Strategies for the Great Wealth Transfer,' which outlines four key actions: engaging both members of a couple by design, making transfer readiness visible, normalizing heir contact early, and engineering continuity before assets move. Financial firms are expected to increasingly focus on multi-generational client engagement, encouraging advisors to build relationships with spouses, partners, and adult children of their current clients. This proactive approach aims to establish trust and familiarity with future inheritors, increasing the likelihood of retaining their business. The industry may also see a rise in specialized services and tools designed to facilitate intergenerational wealth transfer and communication, as firms seek to mitigate the risks highlighted by this research.
Beyond the Headlines
Beyond the immediate business implications, Protective's research on the 'Great Wealth Transfer' touches upon broader societal and ethical dimensions. The study implicitly highlights the evolving nature of family wealth and the increasing complexity of financial planning across generations. Ethically, it raises questions about the responsibility of financial advisors to ensure the long-term well-being of client families, not just individual clients. The potential for family conflict over inheritance, as noted in the study, underscores the need for sensitive and comprehensive planning that addresses not only financial but also emotional and relational aspects of wealth transfer. Culturally, the findings reflect a shift in how wealth is perceived and managed across different generations, with younger inheritors often having distinct financial goals and preferences. This could lead to long-term changes in financial education, estate planning practices, and the role of financial advisors as facilitators of intergenerational dialogue and harmony, rather than just asset managers.
