After Chelsea and her younger sister lost their mother a year ago following a stroke, the familys financial advisors did more than just make recommendations regarding the roughly $3 million the two young women were set to inherit.
They were very kind and went out of their way to help us, said Chelsea, 30. They not only gave careful and patient explanations but showed true concern. Knowing Chelsea was overwhelmed by her mothers death and caring for her newborn baby, they went to her house and just hung out.
According to Chelsea, largely because of their patience, thoughtfulness and willingness to listen, these advisors are still working with her and her family, an uncommon scenario according to the often-cited statistic that 90 percent of todays heirs dont retain their parents advisors. Like Chelsea, some of those heirs will be women, as $30 trillion in inter-generational wealth changes hands over the next 40 years. But unlike Chelsea, many heirs may not see a strong enough reason to stick with their parents advisor.
This may have nothing to do with an individual advisor or his or her performance, industry experts say: according to the report by global consulting firm Accenture The lsquo;Greater Wealth Transfer: Capitalizing on the Intergenerational Shift in Wealth, Millennials are less trusting of financial advisors than previous generations.
[In our experience], the kids dont necessarily have bad feelings toward the advisor; they just dont feel connected to him or her. And they dont feel that they were treated as a partner in the decision making, said Robert N. Grant of Grant amp; Gordon LLP, a law firm specializing in the transfer of wealth. The person is almost always viewed as their parents advisor, and often they want to get their own advisor. That doesnt always happen, but it can be part of establishing their independence, outside of the shadow of what are sometimes very successful parents with strong personalities.
The good news is that losing the familys business when a client passes away is not inevitable. There are practical strategies for retention that advisors may want to consider using both before and after a clients death.
Not Your Parents Advisor
Establishing a relationship with the entire family and meeting with inheritors long before the principal client passes away may seem like a nobrainer, but theres more to it than just including clients heirs in meetings. Heirs may need to feel their own connection to the advisor.
For example, Anne Rieder, managing director at VennWell, says her firm builds trust and establishes a connection with clients heirs by treating their personal financial planning as part of the clients package and fee. We will offer to do a financial plan for those family members. Even if theyre in their twenties and just investing in a 401(k), Rieder said. We give them 2 the same level of service because we look at the family as the relationship, not just the person.
There are also very real generational differences to consider, such as preferred methods of communicationemail versus text, for example. Jane Williams, Chairman and co-founder of Sand Hill Global Advisors, says her firm often assigns a younger, more compatible advisor to work with the heirs. We really want to see advisors be able to relate to the next generation, Williams said.
Grant agrees that this may be an effective way of getting around the difficulty of changing habits of older advisors. If the investment advisor is relating to someone who has grown children, they will typically not be young themselves. And that ability to adjust to a younger generation requires skills that many traditional, older advisors dont necessarily have or are unwilling to take on. Habits are difficult to break.
So are personal styles. If you want a relationship to continue after the principal client passes, then you may want to consider the huge emotional component of inheriting money, especially with female clients. Often female clients complain that the advisor would listen, but they felt like they were just listening enough to then be able to develop a plan, said Kathleen Burns Kingsbury, author of How to Give Financial Advice to Women: Attracting and Retaining High-Net-Worth Female Clients. Female clients want to be listened to in a way where they feel understood and cared for, and then they can make a plan.
This may mean being patient, waiting until the person is ready to deal with the money, and remembering that along with inherited money most often there comes a set of complicated emotions.
It can feel a little uncomfortable because its knotted up with the pain of loss, Williams said. A lot of our clients feel an awesome responsibility, not just a gift or sense of freedom, though it may bring those feelings as well. Some people even feel guilt when they get this money. Chelsea certainly understands this. Its very hard to accept and use the money, she said. We grew up pretty well-off, but my parents worked very hard for that money.
Part of Chelseas inheritance from her parentsher father passed away before her motherwas placed in a trust that she and her sister dont have full control over until theyre 35. Their parents financial advisor, now her advisor, is co-executor, so Chelsea has to get the advisors approval before she can use the funds. This adds to the feelings of guilt, Chelsea said, even though shes only taken money out of the trust for such practical things as starting a college fund and childcare for her baby. It still feels strange to ask for it, she said.
Indeed, the feelings around inheriting money may best be addressed early on, says Eleanor Blayney, the CFPreg; Board´s consumer advocate. People dont have these discussions with their elderly parents, Blayney said. They dont want to because it seems like theyre just waiting to see what money they get. Sometimes the best role a financial planner can play is to facilitate these conversations. Get people around the table and take some of the 3 stigma out of the discussion of money between parents and kids.
The Digital Connection
Of course, one advisors loss can be anothers gain when inheriting clients walk away from their parents wealth managers. According to Accentures The Greater Wealth Transfer, the most important traits to consider if you want to attract Millennials are their tendency to use social media for recommendations and to do their own research online before they contact you.
Accenture suggests that advisors may want to consider developing an online presence built around educational material shared on your website, blog, and through various social media platforms. The report also suggests that advisors consider getting active on social media by sharing original content and other relevant information.
Having a strong online presence has always been a priority, Rieder said. This year, we refreshed our website and launched an online portal where clients may access their account information anytime, and we will be rolling out a mobile app in the first half of 2015. This is the kind of account access the next generation is looking for, and we are prepared.
Based on the discussion above, here are some strategies advisors may want to consider to help retain clients through the generations:
- Be sensitive about discussing finances with heirs immediately following the death of a loved onetake your cues from family members about when to bring up the issue of financial planning.
- Treat the whole family as your clientmake heirs feel like they are part of the plan.
- Encourage discussions between parents and children on inheritance issues and feelings earlybefore a loved one passes away.
- Try to pair heirs with advisors they can relate to: younger advisors may work well with younger heirs.
- Craft an effective digital strategy to reach out to Millennialswho often prefer to conduct their financial business online.
First Foundation (NASDAQ:FFWM) has earned a consensus broker rating score of 1.33 (Strong Buy) from the three analysts that cover the stock, Zacks Investment Research reports. One analyst has rated the stock with a buy recommendation and two have assigned a strong buy recommendation to the company. First Foundations rating score has declined by 33% from 90 days ago as a result of various analysts ratings changes.
Analysts have set a 12 month consensus target price of $23.83 for the company and are expecting that the company will post $0.30 earnings per share for the current quarter, according to Zacks. Zacks has also assigned First Foundation an industry rank of 216 out of 265 based on the ratings given to related companies.
First Foundation (NASDAQ:FFWM) opened at 23.25 on Monday. The company has a market cap of $349.26 million and a PE ratio of 17.11. First Foundation has a 52 week low of $17.50 and a 52 week high of $24.73. The companys 50-day moving average price is $22.19 and its 200 day moving average price is $20.03.
First Foundation (NASDAQ:FFWM) last released its earnings results on Thursday, July 23rd. The company reported $0.35 earnings per share for the quarter, topping analysts consensus estimates of $0.29 by $0.06. On average, analysts anticipate that First Foundation will post $1.17 EPS for the current year.
A number of equities research analysts have recently weighed in on the company. DA Davidson began coverage on First Foundation in a research note on Tuesday, July 14th. They set a buy rating and a $23.50 price objective for the company. Sandler ONeill initiated coverage on First Foundation in a research note on Thursday, June 25th. They issued a buy rating and a $21.50 target price for the company. Raymond James started coverage on First Foundation in a research report on Wednesday, July 15th. They set an outperform rating and a $22.00 price objective for the company. Finally, Zacks lowered First Foundation from a hold rating to a sell rating in a report on Tuesday, September 15th.
In related news, Director James G. Brakke bought 1,668 shares of the companys stock in a transaction that occurred on Wednesday, September 9th. The shares were acquired at an average price of $21.11 per share, for a total transaction of $35,211.48. The transaction was disclosed in a filing with the Securities amp; Exchange Commission, which is accessible through this link.
First Foundation Inc. is a financial services and bank holding company. The Company provides a platform of personalized financial services to high net-worth individuals and their families, family businesses and other affiliated organizations. It conducts its operations through its wholly owned subsidiaries: First Foundation Advisors (NASDAQ:FFWM) and First Foundation Bank (FFB), and First Foundation Insurance Services (FFIS), a wholly owned subsidiary of FFB. The Company has two business segments: Banking and Investment Management, Wealth Planning and Consulting (Wealth Management). Banking includes the operations of FFB and FFIS and Wealth Management includes the operations of FFA. FFB offers specialized services, including trust services, online banking, remote deposit capture, merchant credit card services, ATM cards, Visa debit cards, business sweep accounts, and through FFIS, insurance brokerage services. FFA provides investment management and financial planning services.
To get a free copy of the research report on First Foundation (FFWM), click here. For more information about research offerings from Zacks Investment Research, visit Zacks.com
If youre planning to get married before year-end, you may need to adjust your withholding to avoid underpayment penalties, says Scott Grenier, vice president of Bairds private wealth management group. Your combined income could also make you ineligible to contribute to a Roth IRA or to deduct contributions to a traditional IRA.
Before the Supreme Courts ruling this year, it was unclear whether married couples who lived in the 13 states that prohibited same-sex marriage were eligible for Social Security spousal and survivor benefits, says Colleen Carcone, wealth planning director for TIAA-CREF. Now, all married same-sex couples can take advantage of strategies that could increase their overall benefits, such as file-and-suspend. Same-sex spouses are also eligible for a share of a spouses veterans and pension benefits.
A surviving spouse of a same-sex marriage can inherit an unlimited amount of assets without paying federal estate taxes. Spouses can also combine their estate-tax exemption, shielding more than $10.8 million from federal estate taxes. The marital exemption is even more valuable in states that have lower estate or inheritance tax thresholds. For example, Nebraska (one of the states that prohibited same-sex marriage before the Supreme Court ruling) imposes an 18-percent inheritance tax on nonrelatives who receive bequests valued at more than $10,000. But surviving spouses can inherit an unlimited amount of assets tax-free.
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