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Intergenerational Wealth Planning – Why is it So Hard?

Intergenerational Wealth Planning – Why is it So Hard?

Every month, it seems as though there is a new article striking fear into the heart of advisors about how they are going to lose their assets when their clients pass away. Common statistics predict an 80 to 90 percent loss of assets when the transfer is to the client’s children and a 45 to 55 percent loss when it is to the spouse. These are alarming numbers, but ones that have been known and discussed for many years. So why has there been so little progress in this area?

Well, let’s look at the recommended solutions:

  • Have clients make introductions to their spouse and children to start “building a relationship.”
  • Create family planning sessions, or private briefings with clients, their children, estate attorneys. and accountants (
  • Meetings to prepare the children for inheritance and wealth management.
  • Change your messaging and service offering to attract Gen X and Gen Y.

These strategies all have their merits and are appropriate for certain advisors and certain types of clients. However, they generally require a shift in philosophy and firm strategy.

Building a relationship with a spouse or child is challenging when the only real benefit is keeping the assets at your firm. Family planning sessions are great in theory, but in practice they can be difficult to arrange. Further arranging multiple advisors to meet with the family may not be warranted for non-ultra high net worth clients. Meeting with children to prepare them for their inheritance can be uncomfortable for everyone; parents may not want to discuss their wealth with their children, children may feel irresponsible or untrustworthy and advisors must find a way to cater to both sides. Lastly, changing your messaging and service offerings can be a great long term solution, but that takes tremendous internal changes and planning.

There is one idea that has proven to be an effective solution for some clients and has an immediate benefit for spouses and heirs. It does not require any internal changes or major initiatives and maybe something that you are already doing. An insurance review.

Life Insurance

In most scenarios, the children and spouse will be the beneficiaries of life insurance policies, either outright or through a trust. Meeting to explain how the assets will distribute in different scenarios has real meaning to those beneficiaries, and positions the advisor as a trusted, knowledgeable resource. This conversation is more palatable to the client as it is not a discussion of the client’s full wealth and assets.

Long Term Care Insurance

Long Term Care insurance is another great opportunity for a conversation as spouses and children generally end up as the coordinators of care. Quite often, families do not have these conversations on their own and advisors bring great value to clients and their family while starting to build a relationship.

Using existing insurance policies that your clients already have in place is a simple and easy solution to begin planning for intergenerational wealth transfers. Here a few simple steps for process of meeting with family members

  1. Review the insurance plans and explain how they work including any riders or limitations; most people do not fully understand insurance policies.
  2. Make sure that the client and their family understand the details and allow for them to ask questions. This is the opportunity to build trust and relationships.
  3. Explain how the family's assets will be distributed under different sets of circumstances; early death of the insured, second to die policies, trust access, tax treatment, etc.
  4. Plan a follow up for family members if needed, and future periodic reviews.

Advisors can also use insurance as way to add these children as clients now. Unfortunately, younger adults who have not started earning sufficient income are not likely to view their parents’ advisor as their advisor. However, these young adults likely need life and disability insurance, especially if they have young families and are working. By implementing insurance plans for them today, they become a client that can be nurtured until they have their own assets and eventually inherit their parent’s wealth.

Think of building relationships with your clients and their families as a type of long-term coverage for yourself. Insurance is the tool you need to accomplish it. By meeting with other family members to review their insurance coverage, an advisor can be sure they are making new connections that will endure.



Kellan Finley is Managing Director for Insurance Decisions, providing insurance resources for Registered Investment and Independent Advisors.

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