Globe Advisor Feature
What advisors are still getting wrong about wealth transfers
The great wealth transfer from baby boomers to their children is not a new topic, but it still manages to surprise.
Gary Teelucksingh, co-founder of the Money Wise Institute (MWI), a Toronto-based consulting firm focused on financial advice, says he’s been discussing the wealth transfer for more than 20 years.
“The reason we’re talking about these things now is because it‘s embarrassing that it‘s a 20-year-old subject and we hear things like people … haven’t talked to [their] children about gifting intentions,” he says. “The children have expectations that are misaligned with your intentions, if you’re the parent.”
A pair of surveys from the MWI conducted with the Angus Reid Forum highlights some of these misaligned expectations and suggests advisors aren’t doing enough to smooth the wealth transition and offer clients solutions.
The survey points to several issues as money starts to pass between generations, from questions of fairness between siblings to the cost of living cutting into what‘s left. For example, more parents are now expecting to spend their money – and many haven’t let their children know what that means for their inheritance.
Globe Advisor spoke with Mr. Teelucksingh and MWI co-founder Kelley Keehn about what advisors could be doing better in terms of initiating tough conversations and courting the next generation of clients.
With wealth transfer talk going on for 20 years or longer, why do you think advisors aren’t as equipped as they should be for these types of discussions, and what should firms and advisors be doing?
Ms. Keehn: [Advisors] are as uncomfortable as the families are. These are very delicate conversations. Advisors are scared: What if we spook our clients? What if we say the wrong thing? Or they’re just oblivious to the issue and assume the next gen will come along, and then they get a shocking surprise because they’re already embedded with the [online brokerages].
Mr. Teelucksingh: [Advisors] have the same issues and hang-ups as their clients. There are things that are taboo, there are things that are uncomfortable. There are things they’ve never talked to their mom and dad about; there are things they’ve never talked to their children about. They have the same challenges as their clients have.
[Advisors] have to step beyond their own personal barriers. There is a bridge they need to be able to cross that takes them from [their] personal blind spot or insecurity or uncomfortableness to the necessity of these conversations to help clients.
I want to go back to what you said about being too late engaging the next generation and finding they’re already using online brokerage accounts or robo-advisors. How should advisors be engaging clients’ children and demonstrating value beyond what they’re already getting?
Ms. Keehn: If you look at your financial pie, one very small spoke is your investments. How about disability insurance? How about your credit? How about fraud protection? How about creating a legacy? Getting a home?
Advisors sometimes – or I should say more than sometimes – are leading with direct competition: How can we be your advisor and take you away from direct investing? Why do you need to lead with that conversation? Lead with a blind spot. Are you maximizing your taxation?
I’ve been speaking about the women’s demographic for 20 years, and where advisors are failing women. They’re failing exactly the same way with the next generation. They’re not being anticipatory.
In the survey results, there was some indication that, after all this hype around the wealth transfer, it may not end up being as large as anticipated, with more people expecting to spend most of their wealth during their lifetime. What‘s contributing to that and how does the wealth industry need to adapt?
Mr. Teelucksingh: It‘s a bit of a yo-yo. People tend to overreact to every situation. They’re either overly cautious, overly confident [or] overly scared. Where’s the middle ground? All this tariff talk and everything else going on makes me feel like I won’t have enough money. Is that the reality? Well, it depends. You really need to stand back and take it more as an indicator of worry and uncertainty.
If nothing else, this just says more people are nervous and they need help sorting through their wants and needs. Enter advisor.
This interview has been edited and condensed.