One distinctive characteristic of a firm launched in the 1930s is that we enjoy numerous client relationships that stretch across multiple generations – many totaling 50 years or more. While the financial advisor serving any longtime individual/family may have changed once or twice, the important continuity role played by the advisor has not. Financial advisors are bridges spanning the years and providing important direction, continuity, perspective and stability to family goals.
Although family dynamics are fluid and evolve over time, the primary goals and objectives for the client tend to be a more established, known entity. A consistent and progressive advisory team can partner with multi-generational clients through many transitions, serving as a compass. Professional advisors often act as the institutional knowledge bank, reminding a family not only how investment planning got them to where they are today, but also how the plan charts their course into the future.
With the constant barrage of information and new tools and products available today, it is no surprise that clients get distracted from long-term objectives or wonder whether their current allocation and mix of investment vehicles and strategies are still optimal for their needs. A stable advisory team monitors these developments and can advise when/if/how they should be incorporated as part of the current plan. Do new tools provide additional protections or diversification or tax advantages? Do they help reduce volatility or limit risk? Do they respond to a new savings structure or enhanced contribution limit that previously didn’t exist? These are only a handful of ongoing opportunities that advisors can help clients navigate.
Other family dynamics occur less frequently but similarly open opportunities for review and evaluation, while also underscoring the need for expert counsel to guide families through these transitions. These include business succession, college planning, philanthropy planning, retirement income strategies, special needs trusts, generation skipping trusts, marriages, births, deaths and divorce.
Since no individual can be an expert in all dimensions of a family’s financial needs, advisors sometimes expand their service teams to include specialists. Once specialists are added, it is important to be sure the team members’ roles and responsibilities are clearly defined so that both the advisory team and clients themselves know who is responsible for what. Further, the very nature of these family milestones means that they happen less frequently but still mark significant turning points requiring dedicated attention and focus regardless of market conditions at the time. This reality further underscores the need for teams and advisor practices to have both breadth and depth of capabilities available when clients most need them.
Why is it, then, that advisors frequently fail to bridge the generational gap with clients? Why would clients knowingly walk away from a trusted team that has served their family for so many years? While hosts of “excuses” are given, a deeper exploration often reveals some common threads. In our experience, the two most common pitfalls are that the advisory practice was neither sufficiently adaptive nor relevant to the family’s ever-changing needs. The original advisory engagement decades ago may have primarily centered on research-based “stock picking,” but as the account grew, the client aged and the family expanded, increasingly the needs shifted. Priorities changed from college funding and then retirement planning and eventually retirement income planning. Because of these shifts in client needs, the capabilities and focus of the advisory practice needed to expand to comprehensive wealth management in order to remain relevant. Unless the practice adapted, it would be viewed as irrelevant to that client’s most pressing needs.
Savvy generational advisors evolve their business models to address clients’ expectations and future needs. By anticipating and planning for these changes, an advisor reinforces their forward-looking relevance. The advisor’s calm professionalism can reassure a client and reinforce his or her value proposition. To successfully adapt and remain relevant across generations, advisors may have to incorporate additional planning capabilities or generational expertise and depth through the hiring of a millennial partner or greater gender understanding through teaming with an advisor of the opposite sex, etc. Standing still in our ever-changing world can be a sure recipe for disaster.
During a recent trip, I drove across San Francisco’s Bay Bridge, noticing the still-standing stations of the original eastern expanse. These have subsequently been replaced by newer versions that are engineered to last up to 150 years and to withstand the largest earthquake expected within 1,500 years (an amazing 8.5 magnitude). The newer materials and technology have replaced versions that, eight decades earlier, were the best and most modern available for the time. Yet without modifications, that 1930s-era bridge would have collapsed. Similarly, advisors who wish to successfully span the generational divide will need to update their service models to ensure their stability and longevity.
Andrew Crowell is vice chairman of D.A. Davidson & Co.’s Individual Investor Group, serving as executive leader of D.A. Davidson’s community relations functions, including acting as the company’s private client group liaison for the Securities Industry and Financial Markets Association (SIFMA). He is a co-manager of the firm’s California region and also sits on the board of directors for D.A. Davidson’s parent company, D.A. Davidson Companies.