Retaining client assets in the face of wealth transfer

Nearly half of financial advisers worldwide view the great wealth transfer as an existential threat to their business, emphasising the need for client retention strategies.

Natixis Investment Managers’ 2024 Global Survey of Financial Professionals, conducted by CoreData Research, surveyed 2,700 advisers across 20 countries including Australia.

It discovered that 46 per cent of advisers across the globe say the intergenerational wealth transfer represents an existential threat to their business. Some 43 per cent are also concerned they will not retain assets from clients’ spouses or next-generation heirs, Natixis found.

More than $3.5 trillion is set to be passed down by Boomers in Australia over the next 20 years, while $84 trillion is expected to be transferred globally, the report stated.

Overall, advisers said they expect to grow their assets under management by 12.4 per cent over the next three years, rising to 13.5 per cent in Asia. But in order to achieve this, the firm said they will need to add an average of 34 new clients each year for the next three years.

VIEW ALL

View all

“Of all the challenges facing advisers in growing their business, keeping current assets on the book is the most critical. Retaining assets relies on strong personal relationships not only with clients but also with their families.

“But when a client dies and leaves their holdings to a spouse or children, the relationship has to reset, and that puts assets under management at risk.”

Respondents stated that they retain client relationships 72 per cent of the time when a spouse inherits assets from the former client. However, when a client’s children inherit, advisers are successful only half of the time.

“Nothing is guaranteed, as one-third of advisers report that they’ve lost significant assets through generational attrition,” the report continued.

With key assets under management on the line, advisers are having to reconsider their business approach by making retention a key strategy, Natixis noted. First and foremost, this means nurturing relationships with older clients and their families.

Three-quarters of advisers globally cited long-term relationship building as the most critical factor for retaining assets. Similarly, 81 per cent of advisers are extending the family wealth planning discussion to potential heirs.

Advisers also said they are currently dedicating less than 10 per cent of their time to sourcing new clients, a critical activity if they want to source 34 new clients each year.

Other key retention strategies include offering ancillary services such as family trusts (54 per cent of advisers), providing personalised services including networking events (47 per cent), and even offering financial boot camps for next-generation heirs (33 per cent).

“The great wealth transfer puts assets at risk, but advisers know they’ll need to focus their efforts on keeping client heirs on the books,” the report concluded.

Late last year, Australian Ethical found an overwhelming majority (77 per cent) of advisers who actively encouraged their clients to engage their children in the wealth transfer conversation saw an increase in client satisfaction and retention of half or more of their clients.

Moreover, Adviser Ratings uncovered that 14 per cent of clients are planning to transfer $1 million and above to the next generation, while 17 per cent signalled they plan to transfer $500,000 to $1 million.

The largest portion, 21 per cent, intend to transfer $200,000 to $500,000, while 16 per cent said $100,000 to $200,000, and 13 per cent plan for $50,000 to $100,000. Nearly 20 per cent demonstrate a willingness to transfer $50,000 or below.