How to retain a client’s heirs, post-inheritance

In the wealth management industry, we’re required to get comfortable talking about death, sensitively but objectively. An adviser can’t make tax-efficient recommendations to a client without discussing their mortality and how they want their estate to be distributed at the end of their life. Likewise, we should be pragmatic about discussing the death of clients and the very real impact this has on business for IFAs and financial planners.

When an individual dies, the greatest share of their wealth typically passes to their partner, child or children. At this time, the beneficiary will decide whether they will rely on the same adviser to help them manage that wealth, or switch to a new one. More often than not, they choose to switch. However, that’s not an inevitable outcome but rather a sign that most firms have work to do to smooth the transition.
 

Less than half of children retain their parents’ adviser

To understand the scale of this issue, we needed robust data. So, we commissioned a survey of over 100 financial planners and IFAs about their experiences. When asked how many of their clients’ children or heirs retain their services post-inheritance, 96% of advisers told us it was less than half.

In cases where the heirs do retain the same adviser, at least one in four tend to move on within two years; every adviser we surveyed told us that the percentage of heirs who remain clients two years after inheritance is less than 75%.

These figures highlight two issues for firms to address: how to retain heirs immediately after a transfer of wealth, and then how to adapt to their ongoing needs to retain them for the longer term.
 

Advisers must consider their retention strategy early

Each year, assets worth billions of pounds are being handed down to the next generation. To retain those assets, IFAs and financial planners need to be thinking about how they can engage with beneficiaries-to-be before any transfer of wealth has happened.

It is clearly apparent that advisers need to spend more time developing the family relationship. Just as an adviser would tell their clients that their estate planning strategy must begin many years before their death, I would tell advisers that their heir retention strategy must start as early as possible.
 

Developing family relationships takes time

It stands to reason that heirs are less likely to leave an IFA or financial planner they know well and have an ongoing personal relationship with. However, many advisers are already stretched maintaining their existing relationships with clients, without this additional burden.

Research shows that when advisers work in conjunction with a DFM on their investment proposition, it frees up capacity to allocate more time to developing and building client relationships. You can leave the day-to-day management and decision-making in the hands of a trusted partner while you focus on giving the best advice.

Having the right products and services at their fingertips means that IFAs and financial planners can not only build stronger relationships with clients but also help propose multigenerational services that will benefit their children. If the children are involved in this process and see the advantage it gives them, they may be less inclined to leave in the future.

Heir retention strategy must start as early as possible.

Heirs may have very different needs from their parents

All advisers will know that there is no one size-fits-all approach to financial planning. Though the assets under management may remain the same after a transfer of wealth, the individual they are managed on behalf of may have different goals, income requirements, tax obligations, etc. The younger generation also often has stronger preferences when it comes to responsible investment.

As our research found, a substantial number of heirs who initially retain their parents’ adviser go on to leave within two years. This indicates that their individual needs are, perhaps, not being addressed and their adviser is not quick enough to adapt.
 

A DFM with a bespoke approach can help

At Investec Wealth & Investment (UK), a bespoke approach to discretionary investment management is a key feature of our service. It can be adapted to meet each client’s specific investment objectives and is highly flexible. Our investment portfolios and dynamic and personalised, and a client’s preferences can be easily factored in.

We’ve worked closely with the IFA and adviser community to develop intuitive, market-leading products and services that help firms help their clients protect, grow, and tax-efficiently pass on their wealth. We’ve earned a reputation for outstanding service at the same time.

Get in touch if you’d like to explore a partnership, or learn more about our products and services for advisers.

The information in this document is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgment as of this date and are subject to change. Past performance is not necessarily a guide to future performance. The value of assets such as property and shares, and the income derived from them, may fall as well as rise. When investing your capital is at risk. Copyright Investec Wealth & Investment Limited. Reproduction is prohibited without permission.