4 ways advisors can attract and keep multigenerational clients

The future of your business lies with younger clients. How well are you connecting with the next generation?

Bringing younger generations into the financial fold can be a growth multiplier for your practice. And many advisors find next-generation opportunities among their existing client base. Showing an interest in advising their family members can help deepen current client relationships — it can also lead to meaningful future business.

Capital Group research has shown that 31% of Generation X, 51% of millennials and 48% of Generation Z respondents said they were willing to work with their parents’ financial advisors.¹ With the aging generations expected to pass on more than $70 trillion in assets within the next 25 years, client needs for generational wealth planning will likely only increase.²

“If you have a family-focused practice, you might have engaged over the years with the younger generations at milestones like high school or college graduations,” says Leslie Geller, senior wealth strategist at Capital Group. “But many of them are now finding success in their own careers, starting families and building wealth — and they are often open to professional financial advice.”

More and more advisors are seeing this opportunity and adding services that cater to families across multiple generations. Building the relationship starts with awareness: Find ways to meet family members and understand their goals and needs. Here are four ideas to help you begin to engage multigenerational clients.

1. Help build bridges between the generations

Research shows that half of advisors meet with their clients’ children once a year, but nearly a fifth say they don’t engage with them at all.³ That lack of engagement could explain why 70% of heirs change advisors after inheriting their parents’ wealth.⁴ As a financial advisor, you can actively engage with the entire family by bringing the generations together for a big-picture planning conversation, known as a family wealth briefing.

Whether it’s a multiday retreat for the ultra-wealthy to catch up with loved ones while getting updated on family finances, or an in-office or virtual event over an afternoon, what matters most is that they have the opportunity to understand and have their say in the family’s overall wealth goals and the plan to achieve them. A family meeting also gives you an opportunity to educate the generations on financial literacy and help the family affirm their core values.

To ensure that both you and your client families get the most out of the conversation, start the discussion around these five foundational elements to family governance:

• Control: Who’s in charge? Clarify everyone’s role.
• Process: How are decisions made and communicated?
• Education: How well are younger generations educated about the family’s wealth and finances?
• Planning: How is everyone prepared for future tax and estate issues?
• Transition: Is everything in place to pass the reins to the next generation and beyond?

“Every family will use those five elements differently, and at different weights at different times,” Geller says.

“Storytelling or hypotheticals can help clients get a sense of how to approach family wealth decisions,” she adds. “For example, what if one of your children marries a successful startup founder, while another child becomes a teacher and marries another teacher? Are the wealth transition decisions different in this case?” Help your clients understand that, as their families grow and the branches separate, the values and financial needs of each individual typically change — and stress that that’s what should drive successful estate planning.

Hosting family wealth briefings can give you an opportunity to engage with multiple generations in a client family on a regular basis and help individuals in each age group with their planning needs. It can also preserve generational wealth in your practice.

2. Engage heirs by gifting through trusts

Even before a wealth transfer occurs, advisors can engage with multiple generations by helping clients plan for second- and third-generation family members by intentionally gifting. For example, help clients create inter vivos trusts, which are trusts funded with gifts or transfers while an individual is still alive.

Clients can consider funding them in ways that can also mitigate future estate taxes, such as using annual exclusion gifts — $17,000 in 2023 and $18,000 in 2024 — or the current estate and gift tax exemption of $12.92 million for individuals (and $25.84 million for couples). Now may be an especially good time to consider using the latter option. The current gift and estate tax was part of the 2017 Tax Cuts and Jobs Act and is set to expire in 2025, when it could revert back to pre-2017 levels, effectively cutting it by half.

Trusts typically feature guardrails, such as age minimums, restrictions on how the money can be used, or caps on how much money can be withdrawn in a certain time frame. But you can also recommend using trusts in a way that’s intended to ignite an innovative spark in beneficiaries.

An “entrepreneur's trust,” for example, can give heirs hands-on experience exploring business ventures and investment opportunities. These trusts often include a clear "why" statement expressing the desires of the grantor. Some may even require heirs to present, to a trustee and a senior family member, a business plan for each proposal, including estimated return on capital and how the investment fits the family’s overall objectives. Using these trusts, heirs can get a real-world education in how to put money to work, celebrate successes and learn from their mistakes — all under the guidance of the trustee, who has ultimate decision-making power.

“These trusts are one way your clients can empower and inspire the next generation to become responsible and engaged stewards of your family's wealth,” Geller says. “Your clients can act like angel investors, supporting family members’ interests, while also getting a peek at how they can manage their financial resources in the real world.”

Families with extensive business or real estate interests could consider setting up family limited partnerships (FLPs). Some FLPs can be established to fund new businesses, allowing a younger family member to apply for capital to support a new venture. In addition to supporting family members through the loan, partners can also get satisfaction of knowing they have seeded a family member’s venture and have a stake in the business.

No matter the option, it can be a good idea to consult with your client’s tax and estate planning attorney when helping clients with trusts.

3. Use philanthropy strategically

Charitable giving is another way to engage with multiple generations through family foundations, endowments, donor-advised funds (DAFs) or other giving vehicles to help heirs build wealth management expertise. In particular, DAFs stand out because they are relatively easy to set up, offer flexibility and have immediate tax advantages. That’s because DAFs allow individuals to make charitable donations today and get an immediate tax deduction, then make grants from the fund over time. Grants from DAFs to qualified charities totaled $45.74 billion in 2022, a 28.2% increase compared to 2020, according to the National Philanthropic Trust.⁵

Even among ultra-wealthy families, who might otherwise set up family foundations, the popularity of DAFs continues to grow. And DAFs allow families to get involved with charitable decision-making in a similar way. Whether your client’s family is already active in philanthropy or just getting started, working with DAFs can be an effective “Charitable Giving 101” course, giving heirs the opportunity to learn how to vet nonprofits, make thoughtful donations, and provide regular oversight and rationalization for donations made.

4. Develop a service model for the next generation

Younger people don’t always have the minimum level of assets required to become traditional clients. Creating a separate service tier that offers streamlined planning or basic financial guidance for a fee could allow you to serve them in a way that still makes sense for your business.

A good place to start is identifying your top client families and looking for ways to serve their heirs. The key is to create organic points of connection between you and the next generation.

Karen DeRose, president and managing partner of DeRose Financial Planning Group in Chicago, leverages the talents of junior advisors at her firm — including her two sons — to help younger clients with specific needs, such as saving to buy a home or evaluating employer compensation plans. She makes checking in on children’s and grandchildren’s lives to learn what planning needs they might have part of the annual meeting with clients, and markets these additional services as a “next-gen foundational plan.” Often, she adds, the older generation pays for the service as a gift to their family member.

If you have a small team, one approach to consider is offering younger clients a subscription-type service, providing a yearly financial plan and, say, one phone call a month for around $2,500 a year, DeRose says. “The younger generations are used to subscriptions; they use them at the gym, for entertainment, buying food,” she says. “Some advisors even have subscription levels: gold, silver, bronze.”

“Parents want their children to develop good money habits,” Geller says. “Helping their children have a better understanding of how money works can build an outsized amount of goodwill with clients and lets your firm set up a foundation for a hopefully long relationship with the children.”

DeRose agrees. “Focusing on clients’ children sends the message that you care about the family,” she says. “What do clients love most and care about? Their children. They want them to be happy. They want them to be financially sound. So it's been working really well for us, and clients really love it.”

¹ “Investor Generational Wealth Transfer Study,” Capital Group, 2020.

² “U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021,” Cerulli.

³ “How three advisors engage the next generation of clients in financial prospecting,” Emoney, November 2021.

⁴ “3 effective ways for advisors to engage with, and win over, the next generation,” Investment News, 2023.

⁵ “The Donor-Advised Report,” National Philanthropic Trust, 2022.