Previously in this series:

• There is more than a 95% chance that when your clients die, the heirs will take their inheritances and run. You're lucky to retain 2% of the heirs as clients.

• This has become a major problem for financial advisors as they enter a period of the greatest transfer of wealth in American history. It takes four new clients to replace just one lost through generational transfer.

• Advisors have failed to develop relationships with their clients' heirs. Thus, the heirs don't understand and appreciate what advisors have done to build and retain the family assets.

• Serious communication gaps exist not only between advisors and their clients' heirs, but between clients and their spouses and even between clients and their advisors.

• All this is due largely to advisors' constant focus on the here-and-now at the expense of developing opportunities for tomorrow. Historically, the financial services industry has focused on preparing assets for heirs. Now, it must also prepare heirs for assets.

Conclusion of Series

Nearly three out of four (70%) of families fall apart and lose their assets after a generational transfer.

This is one finding from a variety of studies cited in a report from Investments Wealth Monitor, a publication of the Investment Management Consultants Association. The three authors are founding directors of the Institute for Preparing Heirs.

The authors cited a 26-year study of differences between "successful and unsuccessful post transition families." Although the differences "had little to do with the acumen of the families' financial advisors," FA Digital believes the problems could be mitigated by more and better communication between advisors and their clients' families.

• "60% (of the family break-ups) were caused by an internal breakdown of trust and communication within the family." (Could much of this have been avoided if the advisors had been more involved with the families?)

• "25% were caused by a failure to prepare their heirs." (Whose failure? Maybe the advisors.)

• "10% were due to a lack of an agreed-upon mission for the family wealth." (Elementary, my dear Watson.)

• "5% were due to other causes such as failures to file and sign tax returns and incorrect interpretations of tax laws." (Where were the accountants?)

This leads us to the conclusion that, in most cases, you are but one of a family's advisors with responsibility for a smooth transition of wealth.

There are the CPAs, estate planning attorneys, insurance specialists, corporate attorneys and trust officers. Perhaps you can assume the role of quarterback and bring these teams together to benefit your clients.

To enrich your practice, do what the Investment Wealth Monitor article¹ suggests:

• Deepen your relationships with your clients' families.

• Cultivate new relationships with successful families planning to transition wealth.

• Expand your network of allied professionals who work with successful families."

Click Here, to download all three parts of this series.

¹Engaging and Retaining Families by Diane Doolin, Vic Preisser and Roy Williams, Investments Wealth Monitor, September-October, 2011.

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