Advisors Lean on Legacy Planning to Help Secure Next-Gen Clients

When the Red Hot Chili Peppers sang “give it away now,” who knew they were talking about assets? They were talking about assets, right?

Estate planning is a common service for clients, but a growing segment of Americans are choosing to give a portion of their wealth away during their lifetimes, according to a survey from Wealth.com and Ritholtz Wealth’s Compound Insights. On average, advisors report that 46% of clients who plan to pass on assets intend to do so while alive, and among clients with more than $25 million, that number climbs to 55%. Planning strategies for the transfer of assets, values and goals both before and after death are no longer exclusive to the ultra-wealthy, and advisors are viewing it as a growth engine, particularly as children often switch advisors after receiving inheritances. 

“We are in the middle of a historic $124 trillion wealth transfer, and families are thinking differently about what wealth is for,” said Rafael Loureiro, Wealth.com CEO. “Advisors who engage both partners or multiple family members report greater confidence in keeping the next generation as clients.” 

Giving While Living

Leaving behind an inheritance is great, but as with giving someone a birthday gift, a lot of clients want to see the look on the recipient’s face when they open the present. “The legacy conversation is happening with all of our clients regardless of age,” said Marcos Segrera, a CFP with Evensky & Katz Wealth Management. “The idea of gifting during one’s lifetime is very attractive. Getting to see your kids enjoy the fruits is meaningful.” The report also found:

• The most common giving vehicles are 529 plan contributions and college fund donations, followed by trust structures and gift amounts that fall below the level at which a client would have to report them on their taxes.
• Some 43% of advisors encourage clients to pass down values and stories as part of their legacy, while 41% promote shared family philanthropy.

Let’s Talk. The trick is finding a way to start conversations about legacy giving, which can be, well, tricky. Just under 40% of advisors hesitate because clients haven’t explicitly asked about it. Loureiro recommends raising the topic during discovery meetings, asking questions like, “What impact do you want your wealth to have during your lifetime?” and “Are there family members you want to involve in future planning conversations?’” 

Normalizing these discussions reduces discomfort, he told Advisor Upside. “Firms that build a repeatable framework around these conversations appear to see the strongest outcomes.”