Asset managers and financial planners need to focus more explicitly on heirs in the run-up to the “Great Wealth Transfer” in order to limit asset outflows and safeguard their own future. They should, in fact, behave more like a family office.
That is according to Natixis Investment Managers, based on its own research among more than 7,000 advisors. Nearly half of respondents view the Great Wealth Transfer as an existential threat to their practice. As the first group of more than 1 billion baby boomers turns 80 this year, the importance of succession is increasing.
In the past, assets often remained automatically with the bank or asset manager of the deceased, but heirs are increasingly deciding for themselves who will manage their inherited wealth. This could fundamentally reshape the sector. One-third of surveyed advisors said they have already lost significant assets as a result of generational turnover.
Limited role for returns
Advisors who actively invest in relationships with clients’ family members tend to retain more assets, the research shows. According to Natixis, this factor carries more weight than other elements of the value proposition. Returns are an important reason for clients to stay, but the research indicates they play a limited role in decisions to leave.
“When it comes to wealth transfer, it is precisely about engaging the next generation,” said Robert Koopdonk, head of the Netherlands at Natixis IM, in an interview with Investment Officer. According to him, broader services increase the likelihood of client retention. He points to estate planning, tax advice, and actively involving children in financial decisions.
Guidance on the impact of an inheritance is also part of this, according to Koopdonk. “When heirs suddenly come into significant wealth, it requires discussion and guidance.” A more integrated service offering is therefore logical, he said. “In that respect, advisors can learn from the way family offices operate.”
According to Koopdonk, part of the sector underestimates the dynamic nature of client relationships. “The end client changes over time. If advisors do not respond to this, assets will flow to parties where the next generation does feel heard.”
Expansion of services
Advisors must not only work on relationships with clients’ families, but also take a critical look at their product offering. Younger generations are showing interest in alternative investments, such as crypto and private assets. Advisors need to understand and integrate these segments into their services, Koopdonk said.
Combining different interests and risk profiles within families presents a challenge, he added. While older generations often focus on capital preservation, younger generations are more likely to seek growth opportunities. According to Koopdonk, this requires a broader approach than asset management alone, with more attention to the different objectives within a single client relationship. “Asset managers often see it as their core task to manage assets, while in the long term it is more important to understand the client and take into account different interests,” Koopdonk said.