Women, for example, are sometimes described as “dual inheritors” – women live longer than men on average, with an additional 5 years of life expectancy in the US and an additional 7 years worldwide1, and are slightly younger than their spouses on average in every country2.
There is also gender variation in investing habits, according to research3 from Vanguard based on its US personal investor clients. Women tend to start saving later in life than men; are more likely to have annual gaps in saving; and are more likely to have uninvested funds. Women typically opened their retirement accounts around two years later than men, the US Vanguard analysis showed, and made contributions across a smaller span of the sample period.
Despite these numerous appreciable differences, most advisers do not have a specific strategy in place for advising and retaining female clients – potentially a significant oversight in light of the fact that women are set to inherit most of the wealth initially as part of the Great Wealth Transfer4. Understanding gender and age differences—and sharing these insights with advisory clients—could be the key to retaining client trust and confidence during the wealth transfer process.
Engagement
A high level of client engagement and dialogue is a cornerstone of any successful advisory relationship, and one of the most important aspects of an adviser’s work. To provide valuable support through a wealth transfer, a thorough understanding of your clients’ needs, objectives and characteristics is crucial; just as important are frequent meetings, assessments and updates so that you can provide well-informed and purposeful advice throughout the relationship.
Engagement efforts begin with identification. Who is the client? Are they married or unmarried, and do they have children? What are their total assets under management (AUM), and what sort of assets make up their overall wealth? What are their most important sources of income? If the client has a partner, how often do you engage with their spouse? And if they have children or other inheritors, how often do you engage with them? Carefully assess the risks and opportunities associated with each attribute to build a comprehensive picture of your client, their wealth and their key relationships.
Once you have gathered key information, you can classify your client. In addition to using traditional segmentation approaches such as assessing AUM, profession and investing style, you can further refine clients with estate planning-specific classifications, including assessments of how many heirs they have and how far they have already progressed with estate planning, to help prioritisation. A female baby boomer retiree with a property portfolio worth €6 million will likely have a different set of needs to a working generation X man with savings of €1 million, for example. What approach will be the most effective for this client’s legacy planning?
Once you’ve built a solid basic understanding, you can engage with your clients whenever you have a suitable opening. There are plenty of chances to engage clients in productive dialogue throughout the various stages of the advisory process – during initial onboarding, regular financial planning meetings, annual reviews, goal-change meetings, events and elsewhere. You could also consider taking the time for check-ins outside of scheduled activity – a quick call or lunch meeting can provide excellent opportunities to get to know your clients better, improve your understanding of their goals and share useful information.
Family-specific engagement
When you’re dealing with generational wealth transfers, you’ll need a sophisticated understanding of the client’s family relationships. How has the client communicated their wealth transfer targets to their dependents or spouse so far, if at all? How involved are inheritors with family finances, and how familiar are they with the client’s objectives and desires? How prepared are the inheritors to receive the wealth the client plans to bestow, and what sort of management capabilities do they have? Inheritors may be unprepared for a variety of reasons – age, life circumstances, estrangement, a lack of interest in financial matters – and advisers can provide significant value in helping successors to manage their new financial circumstances.
In ageing populations, inheritors are often well into middle age. Whatever the age of your clients’ inheritors, making sure they are well-prepared for a full range of eventualities is an important aspect of your work as a financial adviser. You can help to provide peace of mind by ensuring that family members have a plan to work from in case of an emergency, as well as a succession structure.
Objections and disagreement are a natural part of succession planning and wealth transfers. Clients may worry that their children are not mature enough to receive a particular sum, and may want funds disbursed only after their descendants have reached a certain age; they may feel uncomfortable with their descendants learning about the details of their finances or estate; they may want to leave different amounts to different children; they may feel discomfort relating to the partners of beneficiaries; or they may want to disinherit some descendants, and so on.
As a financial adviser, you will need to create a transfer structure that satisfies the wishes of your client. Flexibility will be required – you may need to meet with family groups in different configurations according to the desires of the main client, or assign specific advisers to specific descendants or groups of descendants. Further, high-net-worth individuals (HNWIs) in particular may wish to implement certain “guardrails”, including specific levels of disclosure relating to asset values.
Family relationships shift and fluctuate over time, and there is no guarantee that your client’s initial set of priorities will remain static throughout the advisory process. A host of variables may be encountered during the course of any wealth transfer effort: an older client might welcome a new grandchild; a beneficiary might start a risky new business venture; a client might divorce a spouse or become interested in a specific charity, and so on. As an adviser, you need to be prepared to adjust your approach in light of any changes to family dynamics and regularly review your planning strategies.
Your proposition
Frequent and continuous engagement with your client allows you to develop a solid proposition that matches and evolves with their needs. Your proposition is the substance of the advisory relationship – the guidance you provide to the client, based on a deep understanding of their financial objectives, family relationships and personal circumstances.
As part of your segmentation analysis, you can asess whether your client is a wealth accumulator or decumulator.
An accumulator is a client who is still in the process of building up their investments and resources – they are likely to be in work or actively investing, with a specific spending target in mind for the future. Accumulators are likely to be more sensitive around fees as their needs are generally simpler than those of clients who have retired or who soon will. While they are interested in transferring their wealth to descendants eventually, they are still working to “grow the pie,” and may want to focus on outperforming specific benchmarks. Advisory work for accumulators can be more homogenous, as the goals of investors in the group tend to be similar.
Decumulators, meanwhile, are clients who have finished growing the pie and are ready to consume it. Decumulators make withdrawals from the sum of their investments and are likely to want more adviser involvement than accumulators as they seek to draw down their wealth in the most efficient and productive way. Work for decumulators tends to be more heterogeneous, involving highly personalised services. Decumulators are likely to be older, and more interested in tailored services like trust creation, charitable giving and succession planning.
While accumulators are generally understood to be “lower-touch” than decumulators, there are some specific needs advisers should consider when working with the former client group. Accumulators may need additional advice regarding cashflow planning, with a focus on retirement (and a future shift into the decumulator group); insurance and protection needs; borrowing; servicing debt versus investing; dual-generation dependence, where they may be caring for and financially supporting parents and descendants simultaneously; and education expenses for their children. Supporting accumulators across the various stages of their financial journey can build significant trust and understanding for an eventual wealth transfer process.
Your proposition will be informed by your firm’s capacities. In a traditional advisory model, your client will look to you for financial planning services—including insurance assistance, estate and later-life planning and tax structuring—as well as investment solutions.
A specialism model, on the other hand, will involve your supporting the client via your firm’s advisory services and through your own network of trusted service providers. This network might include lending brokers, tax advisers, solicitors, insurance brokers and more depending on their relationship with the client. If your firm employs the specialism model, understanding which partners to involve at the right time is essential.
A specialism approach can free up time which you can then spend building relationships with your clients. Freeing up time with a specialism model can allow you to devote enough time to having the necessary iterative (and often emotive) conversations with clients around legacies; it can also potentially mean you are able to handle a larger number of clients, including the simpler accumulator clients.
Closing remark
As multiple trillions in wealth are moved from one generation to the next over the coming decades, financial advisers should ensure that their practices are adequately prepared to address this massive shift. The scale of the change presents both challenges and opportunities; one of the keys to success is developing solid client propositions supported by close engagement with the individuals and families served in the advisory relationship.
Engagement means identifying the opportunities presented by a wealth transfer scenario to your clients and their loved ones; meeting with clients regularly to discuss their situation and their objectives; ensuring that client descendants are involved in the conversation; and establishing ways of working that make sense for clients, descendants and any other beneficiaries.
Developing a solid proposition involves honing your service and your offering, and recognising what differentiates your firm and the guidance you provide from competitors; creating a robust business model that can weather the volatility of the financial services industry; and embracing technology to scale your business and boost efficiency where possible.
Takeaways
Inheritors are a highly heterogeneous group. Understanding the demographic should be a key priority for financial advisers hoping to support the next generation.
Women are under-served by the financial services industry, despite being set to inherit a majority of the wealth passed down in the Great Wealth Transfer.
To support clients in transfer efforts, advisers should develop solid propositions tailored to customer needs and engage with clients regularly to understand their objectives and financial situation.
Building a comprehensive understanding of clients’ desires, financial acumen, investing style, family relationships and retirement needs should be a key priority for any adviser working with older clients.
Footnotes
1 Source: Harvard Health Publishing, “Why men often die earlier than women”, 2020.
2 Source: Pew Research Center, “Globally, women are younger than their male partners, more likely to age alone”, 2020.
3 Source: Vanguard, “Closing the gender gap in IRA balances”, May 2024
4 Source: McKinsey, “Women as the next wave of growth in US wealth management”, 2020.
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