Abiola Adediran is a partner at Genea Family Office Limited helping enterprising families to build sustainable, lasting legacies.
I have observed that more heirs are choosing to part ways with their family’s long-standing wealth advisors after inheriting their fortunes. While this may seem like a significant concern for advisors, I believe it is indicative of broader issues in how advisors currently engage with family groups. This phenomenon raises questions not only about the advisor’s ability to cater to the next generation but also about the impact of this shift on the long-term financial stability and legacy of the family itself.
As a wealth advisor, a family’s decision to change advisors can significantly impact your practice. Such transitions can disrupt established relationships that you have cultivated over time. Trust and rapport with the client and their family are at the core of a wealth advisor’s work, and a transition can threaten to unsettle those foundations. It often leads to adjustments in investment strategies, and because each family has unique financial goals and risk tolerances that were considered to tailor your strategies, a new advisor might bring a different approach that can challenge your existing strategies, necessitating adaptation that might be time-consuming.
Ultimately, I believe the fundamental question for us as advisors is whether the change in investment strategy should be solely reactionary to a change in control or ownership. Alternatively, we may advocate for a more proactive approach to ensure the continuity of the family’s financial legacy. In my experience, the latter option—proactively engaging wealth owners across generations—can not only foster a more robust and dependable solution for the family but also enhance your resilience and adaptability as an advisor in an ever-evolving financial landscape.
But what do these insights mean for advisors in practice, and what can be done to mitigate the risks associated with these changes? To unravel the complexity of this challenge, we must delve into the intricacies of family wealth management, the evolving role of advisors in bridging generational divides and the imperative for multi-generational engagement.
The Family’s Disconnect With Wealth Advisors
One of the critical aspects that emerges is the prevalent disconnect between wealth advisors and the rising generation within family groups. Advisors, particularly those who have been with the family for an extended period, often find themselves focused on the incumbent or the current wealth holder. However, in the context of family wealth, the client is not merely the person in control of the wealth; it is the entire family unit, spanning multiple generations. This disconnect raises several important questions: Are you truly engaged with the rising generation? Do you understand the unique needs, aspirations and concerns of these future wealth stewards?
Unfortunately, I have found that this often is not the case. Advisors frequently concentrate their efforts on the incumbent’s requirements and overlook the rising generation’s distinctive circumstances. This approach lacks a vital, long-term perspective that is necessary when dealing with family wealth.
Adapting To Multigenerational Needs
As wealth advisors, I believe we need to continuously update our knowledge and adapt our strategies to remain aligned with the family’s evolving needs. This adaptation may encompass embracing sustainable impact investments; incorporating technology; and integrating innovative strategies that resonate with the younger generations.
I have found that when rising generations feel heard, valued and respected by their family’s advisors, they are more likely to embrace the family’s long-term financial goals. Focus on building strong, individualized relationships with each family member, as their financial needs, objectives and preferences may vary significantly. Initiate family meetings, provide financial education and encourage goal-setting. By creating safe spaces, setting realistic expectations and documenting discussions, you can play an essential role in ensuring younger family members are comfortable communicating their concerns and expectations and contributing to successful wealth management across generations. This alignment of interests can result in a smoother transition of wealth stewardship, enhance the overall quality of decision-making, and strengthen your advisor-client relationship.
Maintaining Continuity Amidst Change
Advisors play a vital role in ensuring continuity in investment strategy and facilitating smooth transitions when needed. This can be achieved by understanding family dynamics, documenting strategies and educating family members. Active engagement of all generations and periodic reviews can help maintain alignment with evolving goals. Consider how you can facilitate family meetings, resolve conflicts and establish legal and governance structures to build strong risk management and adaptable responses to changing circumstances.
Determining when a shift in investment strategy should occur is also important to ensure that the change is prompted by thoughtful considerations rather than an abrupt transfer of control. Some ways you can help to ensure a successful transition and the preservation of the family’s financial legacy include maintaining proper records, aligning with family values, and having transparent communication.
Preparing For The Unexpected
Contingency planning is a crucial aspect of family wealth management, and advisors need to be able to help the families they work for prepare for unexpected situations. By building robust contingency plans that encompass various scenarios planning, establishing emergency funds, developing comprehensive risk management, continually reviewing and adjusting financial plans, diversifying investments and having clear documentation in place, you can help your client families navigate unforeseen challenges with resilience and financial stability.
Securing The Family’s Financial Legacy
For both advisors and families, I believe the solution to these shifts lies in proactive, multi-generational collaboration. Advisors need to proactively engage with multiple generations, align with their changing needs and be equipped to navigate the complex dynamics of family wealth. By embracing this paradigm shift, you can help guide your client families across the generational bridge toward a more secure and prosperous future.
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