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Are You Ready for the Great Wealth Transition?

Advisors need to assume an evolving role based on the changing needs of ultra-wealthy clients.

By David Toth

A perfect storm of market appreciation and demographics points to a progressive and sustained growth opportunity in the ultra-wealth business. Now that the time of great opportunity has arrived, how prepared are advisors to assume an evolving role based on the rapidly changing needs of family businesses and families of wealth in transition?

First, we need to ascertain why private business owners may be ready to make a transition.

Age of the business owner: Mid-to-large private businesses are still run by owners who have, up until recently, done their best to avoid retirement. In fact, 30 percent of owners are over 67 years old, and more than two-thirds are over the age of 57. 

Mature businesses: Nearly one-half of private businesses are operating in a maturing industry, making them a prime target for disruptions by new, rapidly evolving technologies.

Valuations: The appetite for private investing has grown nearly threefold, suggesting that the value of private businesses may be peaking, which should add a sense of urgency for private business owners to monetize part or all of their businesses.

Family Generation Transitions

How are families preparing to make wealth transitions?

Increasing need/demand for education: Education is the glue that can help hold a family together through generational transitions. Yet, good intentions around education are unfulfilled. According to the numbers, an equal percentage (31 percent) are providing education to those who are considering education, whereas a sizable proportion of families (38 percent) have no plans to educate family members. 

As demand for service grows, family members may look to their family office to do more: However, it’s the rare family office that has enough resources to provide the full breadth and depth of services required for a family in transition. 

Collaborative partners: Advisors who prove themselves to be collaborative partners with families, their family office executives and other external advisors will be well-positioned to serve these clients as they approach a family transition.

What Are Advisors Doing?

Based on our in-depth research and discussions with some of the top wealth advisors here’s what we found:

Client concerns are changing, so their needs are growing: We’ve heard from wealth advisors that becoming more attuned to conversations that have a nuanced change in tone or keeping in touch with the client’s other advisors can help them better anticipate a pending transition.

Several multi-family offices we spoke with have begun to catalog their case study experience with families and/or family offices in transition. In turn, they use these experiences in training their teams, improving their processes and informing new clients of not just what they can do for their clients, but how they will go about it.

Leading wealth advisors have re-adjusted their business models, including pricing, hiring practices and marketing, to accommodate what they see as a fundamentally different way of doing business with families of wealth in transition.

David Toth is managing director at Family Office Exchange.

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