Here's a sobering statistic for advisers who believe they will serve the adult children of aging clients — only 13% of affluent investors report that they choose to work with that adviser, according to new research from Cerulli Associates.
Equally discouraging, perhaps, is that of the remaining 87% of investors who report not using their parents' adviser, 88% of them indicate that they had never even considered doing so.
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"By expanding its network to encompass the next generation, a practice not only increases its retention opportunity at the point of wealth transfer, but also creates the potential for referrals from the heirs whose peers may have assets in transition as they move between jobs in their careers," said Scott Smith, a director at Boston-based Cerulli.
When respondents who received an inheritance were asked what they did with their funds upon receiving them, 20% of recipients indicate that they maintain a relationship with the same firm, while 36% moved the assets to be managed with the rest of their portfolio, and an additional 19% moved to a new adviser or to a robo-adviser platform.
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While younger investors may not currently fit the practice's targeted client profile, "there is a very high correlation in wealth outcomes among successive generations," Cerulli said in a release. "By combining personalized advice at periods of crucial need with digital advice tools, practices can substantially increase their ability to both retain current assets and attract new flows among the emerging wealth segment."
