Advisors Are Missing Wealth Transfer Connection

Generational wealth transfer is turning into a sizable stream, but a lot of the wealth appears to be spilling through an incumbent advisor’s fingers, according to new research.

That’s a sign that advisors should be doing a better job of knowing whether benefactors beyond mom and dad are prepared to leave an inheritance to a niece or nephew, said George Walper Jr., president of Spectrem Group.

Advisors know all about life events like the birth of a child, the first home purchase or even what mom and dad plan to leave to their heirs.

But far fewer advisors are aware of that inheritance from a generous aunt or uncle, an in-law or even a friend, and this at a time when the number of wealthy households in the U.S. has reached record highs.

“It’s like a big puzzle and you want to be in the middle of the puzzle with your clients,” Walper said. “It’s continually talking to clients and communicating with them.”

Now is the time for advisors to ask questions and prepare client portfolios for when clients inherit the windfall.

Wealth transfer, while not yet a flood, is washing over as a “pretty big trickle,” Walper said, and advisors need to be prepared for when the spigot opens in earnest.

Inheritance Changes Advisor-Client Relationship

Only 44 percent of people who inherited wealth kept their previous advisor, according to Spectrem’s research of more than 4,500 mass affluent investors, 5,000 millionaire households and 2,000 ultra-high net worth investors.

“I’m not sure 44 percent is a very good number relative to the opportunity,” Walper said.

Many wealthy consumers don’t not have an advisor at all, the research found.

For advisors, the wealth transfer opportunity is vast and the client-advisor relationship changes as the account size suddenly balloons by orders of magnitude.

That’s an opportunity to do things differently instead of simply allocating more money in the same way, as oftentimes the inheritance is enough to kick the beneficiary into another wealth strata with tax and estate planning challenges.

Nearly three-quarters of people who inherited money last year received between $100,000 and $500,000, Spectrem Group found.

Another 13 percent received between $500,000 and $999,0000 and 14 percent received more than $1 million.

Additional Findings:

• 63 percent of people who inherit money use an advisor.
• 44 percent kept the advisor they had previously.
• 12 percent began using an advisor upon receipt of an inheritance.
• 4 percent switched advisors upon receiving an in heritance
• 3 percent of inheritors added the advisor of the benefactor.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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