Transitioning Wealth: What it is and Why it Matters for Retention

Published by Judson M. Stone, Director - Senior Account Executive, Business Development
August 3rd, 2017

The financial services industry is at the brink extraordinarily exciting times. Over the next 15 years, there will be a transfer of approximately $30 to $33 trillion from the current generation to the next. We also know that between 63 and 67 percent of wealth is transferred from one advisor to another when a person dies. These statistics define a pivotal priority for today’s wealth managers, who must get in front of the wealth transfer wave and connect with the new generation before they take their business elsewhere.

Until now, advisors have spent considerable time and energy building relationships with decision makers but little to none getting to know their clients’ children. Without a connection to the next generation, advisors offer no worthwhile reason for soon-to-be-heirs to keep their inherited accounts where they are. If advisors can speak to the emerging generation of investors in compelling ways, they can not only retain their current book of business, but also position themselves for significant growth.

When Performance Reporting is not Quite Enough

Typically, when advisors are working to woo new clients, they showcase their performance against market benchmarks and the competition to prove their expertise. Performance reporting is an extremely handy tool that lets advisors show investors where they are outperforming the market and the advisor down the street, but it works most effectively when investors thoroughly understand the metrics.

And therein lies a potential hang-up: Performance analytics are sophisticated data. Many investors, especially those who are just beginning their own wealth management journeys, do not understand the technically nuanced information presented in statistical reports. Performance data confirms advisors’ track records, but for many investors, it does not offer relatable information.

To effectively connect with the next generation of investors, advisors should consider reporting that complements highly technical analytics with data that is relevant to prospective clients’ goals. By speaking in a context the investor understands well, advisors can begin to nurture a relationship and establish themselves not only as a savvy executor of decisions, but also a true fiduciary.

A Better Way to Handle Generational Retention

Goals-based reporting gives advisors an additional tool that lets them adjust the conversation to focus on clients’ priorities. With investors’ goals at the center of financial discussions, advisors can present and align their investment management strategy to clients’ target concerns. As younger clients’ priorities and concerns evolve over time, so do goals-based conversations and reporting.

Reporting on clients’ goals helps advisors accomplish two key things. First, shifting the conversation from advisor results to client goals personalizes and strengthens the client relationship. It also helps advisors cultivate the same trust with the new generation of investors that they worked to build with their parents. When investors drive reporting from clients’ priorities – which are likely to be quite different from their parents’ – it underscores the advisor’s role as a fiduciary that truly has the new investors’ best intentions in mind during a transfer of wealth.

Goals-based reporting helps advisors build new levels of trust with next-generation investors. By enabling them to showcase keen management skills that relate directly to clients’ priorities, advisors often earn new business managing additional assets that new clients previously had handled elsewhere. They may also experience an uptick in referrals and growth in their sales pipeline as a direct result of clients’ increased satisfaction.

Tools for Supporting Transfers of Wealth

Goals-based reporting tools help facilitate transfers of wealth because they simplify complex data. Not only do they present numbers representing market value and rates of return, they display them alongside a narrative about what is occurring as it relates to the clients’ priorities.

The narrative is also useful for the older generation because it answers their questions and provides account insights in plain language. For the newest generation, today’s reporting solutions offer autonomy and independence in reviewing the data. Reporting tools empower them to be more in control as they gather answers and explanations that are relevant to their wealth management journey.

First Rate now provides flexibility within a single platform to choose goals-based reporting, performance reporting, or both to strengthen their investment presentations. The CORE solution works by importing data directly from advisors’ financial planning software. It enables advisors to track investors’ progress toward their goals and to build in decision points that can then be presented to their clients.

CORE is both flexible enough to provide one-off reporting, and comprehensive enough to enable advisors to quickly review all their accounts. It puts data at advisors’ fingertips to help them identify which relationships may be out of sequence and which are in lock step with the milestones on their goal paths.

About the Author: Judson M. Stone, Director in Business Development, has been with First Rate since 1995. Jud works as an Account Manager developing new and current opportunities with prospects, clients and strategic partners. Stone has served in multiple groups at First Rate, working as a Performance Analyst, Product Developer, Business Analyst and most recently as Development Manager in Professional Services. Connect with Jud on Twitter @judson_stone and on LinkedIn.

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