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Unlocking the legacy
Unlocking the legacy

Sep 01 2023 / Round the Table Magazine

Unlocking the legacy

Two advisors forge multigenerational bonds within the same families.

Topics Covered

The ability to establish and nurture relationships across multiple generations within the same family can build a decadeslong pipeline of future clients for an advisor and render their practice more attractive for a successor when the time comes to sell. One MDRT member’s business model persuades prospects by leveraging the benefits of having the family wealth endure for generations to come. Another advisor connects with multigenerations by teaching financial literacy to children and young adults. 

Asset planning across generations 

The worst time for the first meeting with beneficiaries is after something has happened to your client.

There’s something that feels insensitive to grieving survivors about their parent’s advisor coming to the hospital or the funeral and asking for birth certificates, driver’s licenses and other documents to confirm identity for the paperwork. Wouldn’t discussing the financial planning and tax consequences of an insurance payout or an inheritance go so much better before there is a death or a tragedy when beneficiaries can be made aware of their parents’ plans? 

Creating that outcome was one reason to build a different business model Hari Maragos, CFP, B Bus, an eight-year MDRT member from Greensborough, Victoria, Australia, adopted to cultivate multiple generations within a family as clients. He acts as the lead advisor and the relationship manager in a collaboration with estate planning attorney Michael Perkins, along with tax accountants and other agents. Together they focus on wealth conservation, estate governance and administration and writing the documents to implement the clients’ strategy and provide ongoing decision-making support as needed. After less than a year of pursuing this target market, they have 54 family groups with multiple generations as clients, including one with five generations (that relationship started with the middle generation and worked its way up to include parents and down to grandchildren, one as young as 4 years old).

“We’re actually helping clients realize the power of pooling their income, their assets, their buying power for people who are not working with us yet,” Maragos said. “It’s been a watershed moment for every family group.”

Establish common ground

Connecting with the other generation usually starts with Maragos explaining to clients that there are tax and financial consequences with their portfolio that will affect their offspring and/or their parents, so they should be included in that conversation. Discussions with all beneficiaries are needed so they can learn who they should be talking to in case something happens to a family member. In instances where the client wishes to pass money to grandchildren, the Maragos and Perkins team finds themselves in a very short time servicing three generations of the same family.

“We get a face-to-face introduction with the clients’ beneficiaries well before any hearts are broken and hard conversations have to happen,” Maragos said. “There are a whole bunch of strategies we can use to assist with the mitigation of an inheritance or wealth tax. Rather than talking about it when something has happened, we’re talking about it while the clients are alive, and you get the kids involved.”

These early conversations seek to discover whether the family has common values, principles and a purpose that unites their interests toward ensuring their wealth endures across the generations. Not every family will get on board if there is a rift among siblings or someone wants to take their share immediately. But for those families that are open, Maragos and Perkins introduce the family bank concept — the same sort of strategy that has worked with the likes of the Rockefeller family. Wealth dissipates when it is broken up among the generations and typically is gone within 10 years after the benefactor’s death, Perkins explains to clients. But if the family takes the long term to preserve that capital and keep it invested for as long as possible, the power of the family bank is collectively maintained across the generations. 

Benefits for the client and practice

This approach enables estate governance, planning, administration and succession to be discussed well before a crisis, allowing the family to make informed decisions, avoid potential conflicts and misunderstandings, and discover solutions or possibilities that they may not have been aware of before. Maragos added that it is much more effective for gaining referrals than talking your clients into handing your business cards to their adult children and hoping they will call someday. “Invariably what happens is the kids start to refer themselves,” he said.

Clients have a life span, of course, and unless an advisor has a relationship with the survivors, the fees and commissions that came from managing the client’s file come to an end when the client dies. In fact, many studies report that anywhere between 66% to 80% of millennials will fire the incumbent financial advisor after inheriting their parents’ wealth. But family wealth managed to last across generations will endure, and so will the advisor’s relationship and the revenue stream that comes from that family. Another benefit is Maragos’ practice looks more attractive. If he ever decides to sell, a pipeline of future clients is waiting for his successor. 

Clients retain Maragos and Perkins separately, and both charge their respective fees for consultation on the front end and service revenue on the back end. Wealth management for them is a multidisciplinary task based on collaboration (as opposed to referral), so there’s no circling the wagons or turf battles over who owns the clients, as advisor and attorney copy each other on every material client correspondence in which they both have a role.

“Just imagine how much better things are with open lines of communication,” Perkins said. “It’s not my client; it’s not your client; it’s not even our client. We’re here to serve a common purpose and that is to help the client who briefs us both concurrently to help them.”

We’re actually helping clients realize the power of pooling their income, their assets, their buying power for people who are not working with us yet.
— Hari Maragos

Teaching the next generation

The only money management that fellow university students knew was modeled by their parents: Don’t spend it, save it. Bobby James Ning, CFP, BA, had a passion for showing his generation how money really works, and with classmate Alphil Jay Guilaran, started a student club that taught financial literacy to the student body. Following graduation, the club became a business, providing financial education at high schools and colleges, and an employee wellness offering for several hospitals and for other health care providers. 

Ning, a 17-year MDRT member, and Guilaran, both from Vancouver, British Columbia, Canada, eventually become advisors, and financial literacy counselling continues to be a service offering for their practice. For a fee, high-net-worth parents, not necessarily clients, enroll their children, generally 8 to 15 years old, into their heirs and beneficiaries camp, which meets for five days for six hours a day. The campers learn about building a business, discover how a business makes money, and participate in an exercise to develop their own business plan. They also practice the power of generosity by directing a portion of their profits to support local charities. Parents are invited to camp on the last day to see their children’s entrepreneurial spirit and what they learned. Some have been impressed enough to retain Ning and Guilaran to provide additional coaching for their child and even recommended their camp to other families. 

The partners are careful not to taint their financial education outreach by pitching their services. “We’re very transparent and explain that we do have a practice, but we’re not going to teach you and then sell you,” Ning said. “We were never trying to use it as a lead generator, but because of the way we did it, people found it refreshing.”

Doing (financial education) has really changed my thinking about how people are willing to pay me for what I know, like they do for a lawyer or an accountant.
— Bobby Ning

The 5-year plan

Another program that brought the practice deeper into multigenerational financial planning is the five-year map. Advisors find out from parents what concerns they have for their children and, for a fee, map out a program from high school through college graduation based on the goals and values parents want to instill in their child. So, a 15-year-old with an allowance learns how to balance a checkbook, read a bank statement and understand what happens to their cash management when they go over the cell phone’s data plan. Budgeting is broken down to spend some, save some, share some, and as the child approaches university, they’ll become familiar with the impact of compound interest on credit card charges and the expenses they will be responsible for during college and their parent’s share. 

Quarterly and annual reviews are done with the child and parent, so all concerned see what happened to the money and what to expect for the next quarter. Past campers and consulting clients have come back as financial services clients upon adulthood. The attraction also worked upstream as parents, who let the partners take a first crack with their children, liked what they saw and became clients.

The connections

A list of scions from affluent families would be impressive, but there will be no testimonials to market since Ning signed nondisclosure agreements. But the practice is making other connections to help families preserve and grow multigenerational wealth.

“You will end up working with those centers of influence, like their family office, private bankers, investment advisors, and people who work with them and recognize the work that you do,” Ning said. “They’ll say, ‘I have a family that may be interested in working with you. Could we talk?’ I found that financial education evolved, so that it became a way to connect with others.”

Also, in a profession that is under pressure to generate revenue from fees and commissions, teaching financial literacy is another revenue stream. “Like our clients who have other business lines and income, we’re getting paid for our knowledge,” Ning said. “Doing (financial education) has really changed my thinking about how people are willing to pay me for what I know, like they do for a lawyer or an accountant.”