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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
Over the next 25 years, more than $120 trillion in wealth will pass to heirs, according to Cerulli Associates.
According to Cerulli’s survey of investors with at least $250,000 in financial assets, only 27% of these future beneficiaries – primarily widows and children – plan to retain their benefactor’s wealth advisor. The share drops to 20% for those who have already inherited their wealth, according to the report published in September.
However, most heirs are not firing their benefactors’ wealth advisors in favor of self-directed investments and digital products. When asked why they chose another path, half of those surveyed said they already had their own advisor. The second most cited reason, with 28%, was the lack of a relationship with their benefactors’ advisor. Only 14% said they didn’t want to work with a financial advisor at all, and 10% said the advisor didn’t reach their specific investment. needs. Survey respondents could choose several reasons.
“Keep in mind that if the parents die in their 70s or 80s, the heir is between 40 and 60,” said John McKenna, a research analyst at Cerulli. “In most of these cases, they’ve become wealth management clients. They have relationships and they’re just going to gradually build on their existing relationships rather than start a new one with a previous advisor.”
For their part, the benefactors who are People considering passing on their wealth are largely ambivalent about whether their heirs use the same advisors, even if they say they are largely satisfied with their services, Cerulli found. While just over a quarter of those surveyed said they would like their heirs to keep their advisor, more than half said they were unsure or that it depended on their beneficiaries. Seven percent said they did not want their heirs to use their advisor, with the most common reason given being that the parties did not yet have a relationship.
The crux of the problem, according to Scott Smith, senior director of advisory relationships at Cerulli, is that clients are often reluctant to discuss their estate plans with their family. Even among investors with more than $5 million in financial assets, 20% said they intend for their heirs to learn about their wealth after their death. The actual number of procrastinators is likely higher, as 34% of wealthy heirs said they were informed of these details after their benefactor died.
“The do-gooders believe they will tell their next generation about it before they die,” Smith said. “But when we ask the next generation, those conversations haven’t happened.”
As a result, counselors may have few opportunities to talk to their clients’ children and explain what they can offer, Smith said. It’s up to the counselor to encourage clients to stop delaying uncomfortable discussions, he says.
“Reinforce it by emphasizing that it’s important for the survivor to be involved early on so they have their feet on the ground and don’t panic as soon as this happens,” he said. “We’re not just trying to preserve assets. We’re trying to make it easier for your survivor when they die.”
