The “Greater” Shift – The Impact of the $30T Generational Transfer Jonathan Bentley In a recent post, we argued that technology’s effect on the delivery of wealth management advice has reached a tipping point. One of the 3 drivers that we discussed was the growing momentum in the adoption of cloud-based applications. The second driver was the ability of platforms like InvestCloud’s to offer fast, low-cost applet creation so that more business processes can move into the cloud. Lastly, the third factor we raised, was the massive intergenerational asset shift that will be cresting over the next several years. While the “Great Transfer” from the WW2 Generation to their Boomer heirs is still going on, it will soon be eclipsed by an even larger transfer wave from the Boomers to their millennial heirs. According to Accenture, this wave is starting now and will continue for the next 30+ years. With that, we will then have transferred more than $30 trillion in assets, which will be almost 3 times the amount that is currently moving to the Boomer generation. Millions in Fees a Month At Risk To break this very large number down to something more practical, there will be approximately $300 billion a year passed down from one generation to the next over the coming 5 years as the generational transfer of wealth to the baby boomers and their children will be hitting its peak. That amounts to an average of $25 billion a month, representing more than $20 million a month in advisory fees at risk. Why are they at risk? Because it is at the point of estate transfer that the client link is most likely to be broken. According to a 2015 InvestmentNews survey of 544 advisors, 66% of heirs fire their parents’ advisor at the point of inheritance. According to some industry experts that figure could be as high as 90%. Therefore, this transfer represents one of the single largest business risks for those firms that are unprepared, and a uniquely exceptional opportunity for those firms that are. Managing the Opportunity What can be done to mitigate this business risk? According to the InvestmentNews survey mentioned above, the top reason advisers lose assets when heirs come into the picture is they have no previous relationship with those heirs. In previous generations, it could have been argued that with all advisory work based on face-to-face meetings that is was impractical to do that with heirs that often live far away from where their parents have retired. With the advent of cloud-based reporting, video calls and electronic signatures, bridging these
distances is no longer the challenge it used to be. However, in order to build these relationships, it is important to communicate with these heirs in the ways that they prefer. New Tech Communication: The Heirs are Already There The Boomers inheriting the money now, and the Millennials after them use technology in significantly different ways than the generation around which most advisory practices have been built. The new heirs have radically different communication habits and expectations than their parents. According to ongoing research by the Pew Trust into the technology use of each generation, Boomers and Millennials are 78% more likely to use the Web than those over 70, and 80% of them use the Web daily, twice the frequency of the older generation. One of the reasons for this higher use is the explosion in mobile usage. The new heirs use of mobile access is 3X that of those 70+, and 50% use mobile access daily versus only 20% of the older generation. Another factor is the dramatic rise in video viewing on the web. The new heirs use media more than 2X of the older cohort, and with the dramatic growth in services like YouTube, which now has more than 4 billion video views everyday, that number is only likely to get larger. Steps for Bridging the Gap These new technology-use patterns raise several important questions: Have websites and emails replaced the phone as the “first touch� communications channel? Will tablets replace the desktop and the most common way to view reporting? Do videos become more common than print in telling your firm’s story? We believe that the answer to all of these questions is yes. Here are 3 practical steps that will help move your firm into a more competitive position. Step 1: Move Beyond the PDF - The vast majority of clients rarely give more than a cursory glance to any document you produce, whether statement or brochure, they are just utilities. As two-dimensional snapshots, documents cannot compete with the higher touch interactivity of the web. With 90% of your target demographic spending hours on the web every day, and carrying it around on mobile devices, reading a PDF is the last thing they want to do. Step 2: Cut up the Commentary - The primary ongoing communication for firms is still a written quarterly newsletter or market commentary. A more effective option is to retire the document and use the same editorial work to create smaller bits of content and deliver it as a blog post. Once you break up that content and begin delivering it as a periodic blog posting it will be more consumable by your clients, it will also improve your site search rankings. Step 3: Leverage Social Networks - Both Facebook and LinkedIn have become
important and useful channels for building and maintaining geographically disbursed relationships. The regulators have clarified the rules and a clear majority of the affluent, the key demographic on which this industry depends are regularly showing up there. The phone calls, printed reports and face to face meetings that have been the basis for advisory relationships for generations are being supplanted by interactive cloud-based reporting, self-service decision support (Robo), video conferencing and social media. The firms that most effectively embrace these new tools have will not only be more effective in retaining their current assets, but will also gain asset share against their slower moving competitors. From market leading reporting applets and advanced website design to curated RSS feeds for automated site content no Cloud provider offers a more comprehensive set of tools for mastering this new domain than InvestCloud. If you would like to find out more, contact us at 888-800-0188 or visit us at www.investcloud.com Jonathan Bentley leads InvestCloud’s content development and management division. From helping advisors better craft and deliver their stories to curating customized advisor RSS site feeds, Jonathan’s team is critical to InvestCloud’s bespoke design and site management services. Jonathan was previously founder and CEO of LightPort Inc., which merged, with InvestCloud in 2013. Previously a practicing RIA, Jonathan was involved in developing web portals for more than 500 advisors and money managers while working at LightPort. datawarehouse 3.0 data ware house 3.0 client portal client communications data warehouse