When it comes to wealth transfer, it’s vital for an advisor to enter into a good personal connection with the client’s family members, apart from maintaining the usual financial connection. In the long run, this helps in the retention of the family members as clients, ensuring that they do not opt for a different financial advisor. The quality, type and frequency of communication are crucial for relationship management, which in turn determines whether the clients and their families will continue with the wealth manager on a long-term basis and also recommend them.
The Relationship-Building Procedure
Since collaboration is an essential part of financial planning, the wealth transfer plan should be initiated through family meetings revolving around the goals and values embraced by each individual member as well as the entire family. Advisors play a critical role in bringing the family members to join the conversation and ensure that every objective is clearly defined. Through dialogues, custom strategies evolve to represent individual investment opportunities, risk tolerances and reporting preferences of each member.
A strong plan is necessary for retention of family members as clients because the relationship between the heir and the wealth manager can tend to dissolve during the transition period. A report by the Institute for Preparing Heirs indicates that 70% of heirs lose their family harmony, assets and money after estate transactions. Out of this, 60% disintegrate due to breach in communication and trust, while 25% collapse because of the advisor’s failure to guide heirs through new asset handling. A strong relationship must be built with the next generation while the original client is alive; otherwise, there are chances of a future shift to an accountant or attorney.
Every member should be given due attention. The younger generation should be educated in the nitty-gritties of financial management, incorporating the relevant technologies and ensuring ready access to information belonging to the client. Easily accessible reports are of immense significance when catering to the needs of the extremely demanding and urbane next-generation clients. Customized plans should be created for meeting the diverse risk tolerances and financial goals, and therein lays the expertise of an advisor.
The Importance of Dynamic Planning
It is not advisable to continue with an old plan because it might become obsolete. Recently a survey was conducted among super-rich families of the United States which revealed that the age of three-fourths of the estate plans of these people was three years or more. Moreover, 95% of the respondents have gone through considerable life changes since the completion of their plans. Periodic revision of the plans is highly recommended.
Trust is very important to ensure effective wealth transfer, and powerful relationship management helps in gradually building trust. Investors may be affected by a wave of negative performance; but through a consistent communication technique that is transparent, honest and direct, advisors can assist clients to comprehend and tide over adverse circumstances more effectively. Communication combined with focus on client relationships across generations will reap great dividends.