As parents, we are always trying to give our children advice on how they should live their lives. Most times that advice or those pleas to sit down and talk fall on deaf ears. But as parents age, the conversations that need to take place with their children become increasingly important.
Household Finances
Family conversations often cover issues such as health care and end of life, but money must also take center stage. The right money topics can be dependent on the age of the child, but should concern budgeting, debt and other, more basic financial literacy topics. The older the child and the parent, you approach more serious topics like the transfer of wealth upon the death of the parents. Starting early talking about money will make these more serious conversations less painful.
New research conducted by Janus Henderson Investors, the Financial Planning Association and Investopedia shows that parents want to do a better job of communicating about money with their children. Conversely, it seems that advisors don’t often talk about how clients can have money conversations with their kids. Only 35% of advisors say they proactively bring up the issue—and 71% of investors say they have never discussed the topic with their financial advisor.
Why You Should Bring up Children
If clients want to talk about children and money, why don’t advisors bring it up? Or better yet, how can advisors bring children into the financial mix in a way that adds to the existing relationship but isn’t a major drag on productivity or time?
Answering these questions is especially important for advisors and families given the amount of money that is set to change hands over the next few decades. The Boston College Center for Wealth and Philanthropy estimates that $59 trillion will transfer from 93.5 million estates between 2007 and 2061. Obviously, families want to prepare the next generation to receive and preserve this wealth.
Advisors want to make sure they continue to manage those assets. Developing a relationship with clients’ children is key to ensuring this, because once parents die and transfer money to their children, there's no guarantee they won't want to find a new financial advisor.
The Bottom Line
However you do it, it’s vital to foster a relationship with your clients’ children. Not only are your existing clients—the parents—concerned about these topics, but their children will also be the main recipients of their wealth in the future. Making sure you start the money conversation with children helps meet the needs of your existing clients, ensures a smooth transfer of wealth and solidifies you as the family’s primary wealth manager.