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Round-Up Of 2012 "NextGen" Programs: A Top Priority for Wealth Managers

Charles Paikert

1 March 2012

Wooing the “next generation” of clients has become a top priority for wealth managers in 2012, and firms are taking a wide variety of approaches to making sure the children of their wealthy clients stay put.

The booming interest in “NextGen” programs has a strong business imperative: industry studies estimate that nearly 90 per cent per cent of assets will walk out the door when clients pass away.

Not surprisingly, wealth managers are pulling out all the stops as they attempt to stem this outflow, and bring in new younger clients in the process. But they also point out that there are other good reasons to offer NextGen programs, including client demand, increasing life expectancy and burnishing the firm’s brand in the marketplace.

“I believe this is very much client-driven, and that’s why you’re seeing more urgency around reaching out to the next generation,” said Leslie Powell, managing director for Citi Private Bank who heads the bank’s next generation development. “Resources are scarce, and we’re putting valuable time and money into it because clients want it.”

Indeed, according to a study of wealthy Americans with $3 million or more of investable assets done last year by US Trust, (view here) only 34 per cent strongly agreed that their children will be able to handle their inheritance, and two-thirds said their children would benefit from receiving information from a financial advisor.

The fact that people are living longer is also spurring interest in NexGen programs, wealth managers say. “In previous generations, wealth was transferred at the time of death,” said Rebecca Meyer, managing director for Pitcairn, the Jenkintown, PA-based family office. “Now, as people are living longer, you’re seeing transitions happen earlier. The younger generation has to do the work to prepare now.”

Wealth management firms also see NextGen programs as another arrow in their quiver in a brutally competitive marketplace. “It’s part of our value proposition,” said Chris Heilmann, US Trust’s chief fiduciary executive. “It’s not a fee-based service and we treat all the information we have as proprietary. We’re seeing young adults beginning to think about picking an advisor at an earlier age than in the past. And if we don’t engage them, and if they don’t see us as relevant, they will go someplace else.”

“When you provide a high quality learning experience about wealth for the children of your clients you build enduring loyalty,” added Charlie Mueller, senior vice president and head of wealth advisory for Northern Trust. “I think that focusing on next generation issues should be an imperative for any advisor serving the ultra high net worth segment.”

While there is widespread agreement with that sentiment among wealth managers, their NextGen offerings are hardly cookie-cutter and nothing if not eclectic.

Upcoming offerings

Here is what some leading firms will be presenting this year:

US Trust: The Bank of America division put its new NextGen “Financial Empowerment Program” online last month. Topics include investing basics; leveraging credit; “life events,” such as dealing with jobs, inheritance, pre-nuptial agreements and divorce; wealth protection, such as insurance, identity theft and internet fraud; estate planning, and managing a business.

The firm will also customize the program for individual families and make live presentations, but having the material available on the web makes all the difference, Heilmann said.

“We just did a presentation for a family that has children who are 19 and 22,” he said. “But if we had walked in cold, I think their eyes would have glazed over. This is a generation that is comfortable with online capabilities and doesn’t just want to sit through a PowerPoint presentation.”

Citi Private Bank: This unit of one of the world’s largest banks will offer week-long “NextGen 2012” educational and networking programs in New York City, NY in June and in London and Singapore in July for young adults aged 21 to 33 who are either children of clients or prospective clients themselves.

Topics covered include traditional and alternative investments, the art market, charitable giving and entrepreneurial business. Attendees will also construct portfolios, business plans and participate in a mock art auction at Christie’s, and have time to socialize at cocktail parties, dinners and at outside activities like bowling.

There is a “graduation ceremony” at the end of the week, and attendees can stay connected through an in-house Facebook-like social network.

The “legacy” or philanthropic portion of the program has become increasingly popular, said Powell. “The focus used to be on who gets what when someone died,” she said. “But young people today are looking away from themselves and more to the rest of the world. They’re more interested in what their legacy will be and what they will be leaving behind, as opposed to what their families will be leaving them.”

Northern Trust: The Chicago-based wealth management powerhouse will co-host its annual two-day Family Business Conference in Chicago with Kellogg Graduate School of Management Center for Family Enterprises in the fall.

“We specifically invite the next generation that is just entering the business or in

the business but have not taken operational control from G1 ,” said Mueller. “The content of this conference includes families telling stories about how the next generation is brought into the business and positioned for success, what worked, what didn't. This allows next gen and first gen to hear these stories from other families that are going through and dealing with the same issues.”

Northern Trust will also host a series of educational "learning days" for the children of clients who are juniors and seniors in college. Topics include tips on constructing an effective résumé, interviewing techniques and use of social media when looking for a job.

There are also short presentations on basic budgeting, investing basics, the importance of credit ratings, using debt and credit cards and philanthropy.

Silver Bridge Advisors: The Boston, MD-based family office had originally planned a big NextGen event for this year but came to realize that “a single event would not be enough to meet the needs of our families in 2012 and beyond,” said chief executive Steve Prostano.

Instead, the firm will “enhance the Silver Bridge Institute’s standard curriculum to ensure that each workshop or seminar we host has a NextGen component,” Prostano said. “We are doing this in particular in our Women’s Perspective workshops and Philanthropy seminars which tend to draw interest from younger generations.”

For example, Silver Bridge hosted an event earlier this month in Boston on “Women, Money, Media and Power,” and presented a “Strategic Philanthropy” event in Palm Beach, FL on 16 February.

In addition, the firm launched The Center for Family Owned and Privately Held Businesses in November, which includes materials on next-generation topics such as succession planning for family businesses.

Wilmington Trust: Last year the venerable Delaware-based firm, now a unit of M&T Bank Corp, hired Tom Rogerson, the former BNY Mellon Wealth Management executive who is one of the best-known proponents of “soft-side” services in the business.

Rogerson said he’s planning a NextGen program to be included at the firm’s annual fall meeting that will have a multi-generational approach.

“I don’t think having a program for children alone is the best approach,” he said. “I think having parents and children together is much more effective. When children go alone to these programs, they come back and tell parents everything they’ve done wrong, and it’s like creating a war of the worlds.”

The fall NextGen program will emphasize “team learning,” Rogerson said. “Parents and children will be in the same room, and will be exposed to the same materials at the same time,” he said. “The emphasis will be on family team building and avoiding conflict.”

Bel Air Investment Advisers: The Los Angeles, CA-based wealth manager holds a NextGen event bi-annually and hopes to have a program ready in the second half of the year, said Todd Morgan, the firm’s managing director.

He expects estate planning to be a major topic, driven by the expiration of the 2010 Tax Act at the end of the year and de-valued assets such as real estate. “Assets are so cheap,” Morgan said, “it’s a great opportunity to move them into estate planning vehicles at low valuations.”

Philanthropy will also be prominently featured. “We’ve seen a change with younger people,” Morgan said. “They’re not as driven and materialistic, and more altruistic.”

For all the good intentions of the NextGen programs, wealth managers have to follow through, said Gary Shunk, principal of Family Wealth Dynamics, a Chicago, IL-based firm that facilitates meetings and retreats and conducts seminars for wealthy families.

“Most advisors are technically trained, but these generational problems are emotional issues, which we work with all the time,” Shunk said. “When I tell advisors what I do, they nod their head, and say they see the need. But all too often they don’t do anything about it afterwards. They talk the talk but don’t walk the walk. They’re just trying to manage and keep clients, but they have to get beyond lip service and get down and dirty and help clients with real problems that aren’t on their portfolios.”