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How to get the attention of wealthy prospects

By Advisor Perspectives
Wealth Management

waste Given today’s competing demands for attention, it’s never been harder to get in front of affluent prospects. But here’s is one statistic that will get you in front of wealthy investors: Research shows that for affluent families, 70% of wealth is lost by the end of the second generation, and 90% is gone by the end of the third. Focusing on hot buttons To engage with prospects, you have to focus on their hot buttons. While leaving a legacy for their heirs is not typically a priority for investors with $1 million or $2 million, the higher up the wealth curve you go, the more likely that the wellbeing of kids and grandkids is a priority. That’s why, when talking with a wealthy prospect, it is worth saying something like, “For my clients with substantial assets, quite often leaving a legacy for children and grandchildren is an important consideration. Tell me, where does this rank among your priorities?” If this is a high priority for them, you could add: “A recent article pointed to research showing that for wealthy families, 70% of assets are gone by the end of the second generation, and 90% are lost by the end of the third generation. I’d be happy to send you that article, but the good news is that there are some things you can do to reduce the chances of that happening.” You can link to that article from Money Magazine: Why Rich Families Lose Wealth by the Second Generation.) The causes of wealth loss The Money Magazine article was based on a report by U.S. Trust, Insights on Wealth and Worth. This report was based on over 600 investors with investable assets over $3 million. A third of the investors had assets of $3 to $ 5 million, a third had assets between $5 million and $10 million and the final third had assets of over $10 million. Here are some of the findings with regard to leaving a legacy:
  • 63% said it was important to leave an inheritance;
  •  ,;
  • just 36% had fully disclosed their wealth to their children; andfmD
  • Only 27% had told children how much they were likely to inherit.
The statistics on loss of wealth across generations comes from The Williams Group, founded by former San Francisco Giants tackle Roy Williams. In conjunction with an academic at the Miami of Ohio School of Business, they studied over 3,000 families to understand why only one third had lost their wealth and family harmony into the next generation. Their key finding: The primary reason for this loss was not due to poor investment performance, taxes or dilution of wealth across numerous heirs; it was the failure to preserve assets across generations due to heirs’ lack of preparation and a breakdown of trust and communication. More about this research can be found in the 2013 Wall Street Journal article Lost Inheritance. (If you are not a Wall Street Journal subscriber, search for “Wall Street Journal Lost Inheritance” to read the article.) How to help clients talk about their wealth This is far from the first article on the challenges that affluent families have in talking about money. The #1 Hot-Button Topic for Wealthy Families discussed research from UBS Wealth Management conducted with both wealthy investors contemplating leaving an inheritance and heirs who had received an inheritance. Here’s an excerpt from that article: Among heirs who have received an inheritance, 34% wish their parents had done something differently and 74% plan to do something differently themselves. These are the top areas that heirs pointed to in which they’ll do better than their parents:
  • 47% will keep their will up to date
  • 43% will disclose the whereabouts of all assets
  • 34% will proactively discuss plans with their heirs
  • 34% will minimize taxes for heirs
  • 33% will have a clear wealth distribution plan
There are some basics to successful wealth transfer that many affluent investors get right, such as maintaining an up-to-date will. Where they fail is having conversations with their children early enough to prepare them for the wealth that they’ll be receiving. This is not easy to do, but some advisors are succeeding at helping affluent investors accomplish this task. The article Five Ways to Get Families to Talk About Finances outlined how some advisors do this:
  • Offer to facilitate the conversation
  • Ensure that clients feel in control of what’s talked about
  • Start with small steps
  • Get reinforcements from clients’ accountants and lawyers
  • Use third party articles to help make this a priority
The Money Magazine and Wall Street Journal articles I referred to earlier will open the door to conversations with affluent prospects, as can these New York Times articles: The Talk You Didn’t Have With Your Parents Could Cost You and What’s Almost as Certain as Death? Not Talking About the Inheritance. Helping wealthy clients talk about their money will add substantial value to your relationship – and it can do more than that. In an environment where every advisor is looking for an edge, developing expertise in helping wealthy families talk about money sets you apart and opens the door to conversations with affluent prospects. This story first appeared in Advisor Perspectives.
Photo: Thomas Hawk

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