Few heirs keep their parents’ wealth advisors, Cerulli study finds

A version of this article originally appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to high-net-worth investors and consumers. become a member to receive future editions straight to your inbox.

According to Cerulli Associates, more than $120 trillion in wealth will be transferred to heirs over the next 25 years.

According to Cerulli’s survey of investors with at least $250,000 in financial assets, only 27% of future beneficiaries (primarily widows and children) plan to retain their benefactor’s wealth advisor. According to the report published in September, the share of those who inherited their wealth drops to 20%.

But most heirs are not firing their benefactors’ wealth advisors in favor of self-directed investments and digital products. When asked why they chose another route, half of those surveyed said they already had their own advisor. The second most popular reason was not having any relationship with their benefactor’s advisors, at 28%. Only 14% said they did not want to work with a financial advisor, and 10% said the advisor did not meet their specific investments. needs. Survey respondents were able to tick more than one reason.

“Keep in mind that if parents die in their 70s or 80s, the heir will be between 40 and 60,” said Cerulli research analyst John McKenna. “In many of these cases, they have become wealth management clients. They have a relationship and will gradually add to their existing relationship rather than starting a new relationship with an old advisor.”

If philanthropists Cerulli found that although those planning to pass on their wealth said they were largely satisfied with their services, their heirs were largely undecided about whether to use the same advisors. Just over a quarter of those surveyed said they wanted their heirs to retain advisors, while more than half said they weren’t sure or that it was up to the beneficiaries. 7 percent said they did not want their heirs to use their advisors. The most common reason for this was that the parties did not have an existing relationship.

The crux of the problem, according to Scott Smith, Cerulli’s senior director of advisory relations, is that clients are often reluctant to discuss estate plans with their families. Even among investors with more than $5 million in financial assets, 20 percent said they want their heirs to know about their wealth after death. The actual number of procrastinators is likely higher, as 34 percent of high-net-worth heirs said they were told these details after their benefactors died.

“Philanthropists believe they will talk about these issues with future generations before they die,” Smith said. “But when we asked the next generation, those conversations didn’t happen.”

As a result, counselors may have few opportunities to talk to their clients’ children and explain what they have to offer, Smith said. He said it is the counselor’s responsibility to encourage clients to stop putting off uncomfortable discussions.

“Reinforce with primary contact that it is important for the victim to intervene early so that they have their feet on the ground safely and do not panic as soon as the incident occurs,” he said. “It’s not just about trying to protect assets. We’re trying to make it easier for your survivor when you pass.”