Economy & Finance

A $30 trillion missed opportunity?

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(Reuters) – If your idea of a client-wooing event is a steak dinner and an investment lecture, you may be missing out on a very big market: the children of your clients, whose tastes differ markedly from those of their parents.

Ignore the kids and their preferences at your own peril. While younger clients tend to have small accounts now, they are expected to earn and inherit enough to make them a significant client base for advisers.

Some $30 trillion in assets is expected to be shifted to younger generations over the next 30 years, according to Pershing LLC, a subsidiary of Bank of New York Mellon. And advisers typically lose half of the assets they manage when those assets are passed from one generation to the next, a 2011 study by consulting firm PriceWaterhouse Coopers found.

In a survey of 317 advisers conducted in February and March, Pershing found that more than half of their affluent clients had adult children, but advisers had talked about finances with only about a third of those children.

Advisers who don’t want to lose those assets should get up to speed on how to win the next generation. The basics: Attract them with engaging events and modern practice-management methods, then retain them with solid financial planning.

“It’s a balance between coming off as a sage, wise adviser but not a codgy adviser,” said Karen Lee, founder of the Atlanta-based wealth management firm Karen Lee and Associates LLC.


You can start by coordinating a family meeting so your clients can introduce you to their children. Make estate planning the focus so you can explore the family’s expectations for their wealth – and try to ferret out situations where the parents and the children might have different financial objectives that could complicate your serving both of them at the same time.

Offer to provide complimentary financial planning to your clients’ children. These accounts won’t pay big, but the parents will appreciate it. Then hand off those accounts to younger advisers in your office. Not only will this be good practice for them, they’ll probably be better at relating to the younger clients.

Remember to have fun, too, with youth-focused events.

Citi Private Bank connects with its clients’ kids via annual, week-long Next Gen events held in New York, London and Singapore. At the New York event, taking place this week, 40 adult children of the bank’s clients are learning about finance via lectures, group discussions and activities such as a mock auction at Christie’s and trading in a simulated foreign exchange market.

“You cannot entertain them with a bunch of Power Point slides,” said Money Kanagasabapathy, head of Citi Private Bank’s Next Gen program. “If you don’t engage them, you’ll lose them.”

Many of the program’s more than 1,000 alumni stay in touch with each other and open accounts with the bank, whose clients each have at least $25 million in net worth, Kanagasabapathy said.

You can also do something on a smaller scale.

Last month Carol Khouri, a principal with Lexington Massachusetts-based Wingate Wealth Advisors, spent $1,600 to treat several of her female clients and their daughters to a spa day, complete with wine and canapes. She’s optimistic that many of the daughters she met will someday become clients.

“I’m hoping the $1,600 that was spent today keeps a $2 million account with me later,” said Khouri, whose firm manages $600 million in client assets.


Consider making over your office to make it more appealing to the next generation, said Wayne Badorf of Wells Fargo Asset Management, a practice-management expert. Put a few magazine-loaded iPads in the lobby, install Wifi and add energy drinks to your complimentary beverages.

You may need to revamp your online image. As long as your compliance officer approves, use your site to link to financial podcasts and interesting websites. And make it a portal for clients to access their statements and make updates to accounts.

Like anyone else, younger clients are just looking for an adviser who cares. Try to show them you do.

Adds Lee, the Atlanta adviser, “It’s really about you being able to speak their language.”

(Reporting By Jennifer Hoyt Cummings- editing by Linda Stern and John Wallace)

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