Print this article

It's Official - Not All Children Use Parents' Wealth Managers

Tom Burroughes

4 April 2019

Wealth managers fretting that their clients' children might not stick with their parents' choice of firm are right to be concerned. A new survey says that 28.3 per cent of offspring do not use their families' managers.

The study, produced by analytics firm , was based on comments from 358 wealth management firms who responded to a survey.

While repeated comments about inter-generational wealth transfer, the desires of Millennials and ageing Baby Boomers can leave wealth managers jaded, the harsh fact is that shifting demographics could threaten business models. On the other hand, it is worth noting that the survey suggests that more than 70 per cent of children are prepared to use their parents' wealth managers, which perhaps is a positive result given the natural inclination of many offspring to take a different path. This publication has asked for further details to establish what other findings arose.

"Our data shows that the vast majority of providers are aware of the importance of involving clients' children early on. Building relationships through financial education or by proactively offering products for clients’ children from birth are effective means to create loyalty," a spokesperson for GlobalData told this publication.

"However, having said that the 28 per cent only refers to the time when HNW clients’ children inherit  – a critical time when inheritors rely on their family’s wealth manager to support them with the complexities that go hand in hand with receiving an inheritance. Further down the line inheritors may still switch to a provider better positioned to address their service requirements. For example, our data shows that younger HNW investors place greater importance on digital distribution channels or ethical investment options," the spokesperson added.

GlobalData's report - 2019: Trends to Watch in Global Wealth Management - states that 38 per cent of the global HNW population is above the age of 60, which equates to 4.3 million individuals. This means that wealth managers need to have a strategy in place to appeal to the next generation of investors.

“Reaching out to the next generation early on is critical, but wealth managers are not doing a good job," Heike van den Hoevel, senior wealth analyst for GlobalData, said.

Involving the next generation during the estate planning process is the single most effective retention tool. However, only 59 per cent of wealth managers across the globe offer inheritance planning services directly, the report said. .

“Of course, discussing one’s mortality is a subject many would rather avoid. But if providers fail to ensure the continuation of the relationship with successors, this will amount to a significant chunk of their current business being lost," van den Hoevel said.