The Importance, Issues Of Working With Younger Generations

Harriet Davies Editor - Family Wealth Report 12 May 2011

The Importance, Issues Of Working With Younger Generations

One of the greatest challenges for trusted advisors is building a relationship with the younger generations of their client-families. This article examines the tools and processes that can help create this dialogue.

Working in the capacity of a trusted advisor to a wealthy family presents many challenges, and perhaps none so difficult or pressing as communicating with the younger generation. As technology and fashions change, it often feels people from different generations are separated by insuperable barriers.

Meanwhile, wealth managers must bridge this gap in order to help their client-families most efficiently achieve their goals, and also to ensure they keep clients in their businesses for the long run.

“It is not wise for an advisor to work exclusively with the wealth creator, especially if the next generation is already in the picture,” says Leslie Voth, president and chief operating officer at Pitcairn. “The risk is that when the decision-maker passes away, there may not be a well-understood plan in place to ensure a seamless transition. Loyalty to one does not necessarily transfer to the next generation. If family members haven’t been given their own voice in the relationship, the advisor stands a far greater chance of losing the client. It is important to have those relationships in place before the inevitable happens.”

A rich seam

It is common to hear that the younger generation are alienated from the financial advisory industry, and that advisors don’t know how to reach them.

Research backs this up. A recent survey by US Trust found that while 84 per cent of wealthy parents thought the next generation would benefit from talking to a financial professional, over half had never introduced them to the professionals who manage their own wealth. Furthermore, 27 per cent of respondents had never discussed intergenerational wealth transfer with their advisor.

Meanwhile, younger people increasingly turn to social media for advice, and are far less likely to have a relationship with an advisor in place. This represents both a great challenge and opportunity.

Same process, different tools

While many advisors probably already realize the necessity of working with “Gen X” and “Gen Y”, they may be less clued up about how to do so.

“One important point to remember is that, broadly speaking, while the tools change, the fundamental points don’t – from culture to culture, or from generation to generation,” says Charles Lowenhaupt, chairman, president and chief executive of Lowenhaupt Global Advisors.

He analogizes working with different generations to working across cultures: the vocabulary has to change.

“Chinese families are not going to talk about philanthropy, but when you talk about duty they get it. The need to define and engage in communities is true across cultures and ages, but the language, tools, and currencies change,” he says.

Lowenhaupt runs a business which has its roots in one founded by his grandfather, serving clients including families that have been involved with his family business across seven generations, so has direct experience in this matter. He says part of the solution to remaining successful in a fast-changing world is being slim-line, rather than building up complex tools and infrastructure that don’t adapt well.

“If you look at the principles – the fundamentals of wealth management – it starts with the question: what is the wealth for? That’s regardless of age or culture,” says Lowenhaupt.


But just getting younger clients through your door may be the hard part. There is perceived to be a lack of trust towards the industry among the younger generation. The disaster of 2008 likely added to this.

“If you don’t build communication tools, you’re going to lose this generation; but it’s about communicating the fundamentals,” says Lowenhaupt.

How do you communicate this point, how do you have this discussion? Lowenhaupt gives a case study of parents trying to engage their children with a foundation.

“They at first had the idea of the children being little versions of themselves, but the kids weren’t interested at all. What the kids really understood was technology. So delegating responsibility for technology to the children got them excited about the foundation, and also gave them a sense of responsibility,” he tells Family Wealth Report.

So it seems finding something relevant to their skills and interests, and delegating them some responsibility, can inspire them.

There is also a lot to be said for using technology inventively. Technology is often cited as a barrier to reaching the young (as it can be hard to keep track of the latest trends), while also being vaunted as the only way to do it. Both are certainly true, and financial services companies are investing heavily in this area.

Citi Private Bank, for example, is developing a social networking site for the offspring of its clients. The firm also launched an Apple iPad application last year, and is now moving into the iPhone application space.

The iPad app, Citi Private Bank Mobile, was designed exclusively for Citi Private Bank’s ultra high net worth clients. Users have the ability to view global economic commentary, global, equity and fixed income research, advisory services newsletters, finance reports as well as video interviews and commentary.

“They’re used to getting info from other sources, and the way they think, their concentration has been altered from growing up in front of a screen. There are firms developing websites where families can communicate with each other, and only certain people can view them, and you can learn about the family history, and this is exciting,” Dr Jamie Weiner, a principal of Inheriting Wisdom, tells Family Wealth Report.

Another example of the online portal approach is Wealth Resources, a free site recently launched to help families and their advisors prepare younger generations for their economic future.

“The fundamentals about human beings stay the same, but yes, tools change, and the younger generation are used to social media,” adds Dr Weiner.

There are many who espouse the benefits of social media, and for certain businesses it has no doubt been a useful if not essential way of marketing themselves and creating awareness.

However, it is probably not a panacea to the problem of communicating with younger clients or potential clients. Lowenhaupt does not use it for his business, as he does not think it is conducive to the kind of discussion that is productive about wealth. It is a busy and public forum, which doesn’t necessarily align well with the principles of managing extreme wealth. This is perhaps very much a matter of what kind of services you are offering and to whom.

They do want to talk

Speaking from observation as a multi-generational wealth transfer specialist, Dr Weiner says the stereotype that the younger generation do not want to engage with the family and its advisors is not true. From the “baby boomer” generation himself, he expected this to be the main client segment of his business, but has actually found there is plenty of interest from the young and wealthy.

The age-old tension between generations still and likely always will exist, “no matter what kind of a family, or where,” he says. The challenge, if you are in the position of working with wealthy families, is starting this conversation, and understanding the language your clients speak.

This is the first in a two-part series about family dynamics, the next will be focusing on how you manage the emotional and psychological aspects of passing on wealth, and how it is essential to tackle these to achieve long-term success in wealth preservation.


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