Most advisors spend considerable time getting to know and understand their clients. Still, the latest edition of our Generations Projects survey, which focuses on high-net-worth (HNW) investors, suggests there are opportunities for advisors to redouble their efforts to comprehend clients’ goals and strengthen their engagements with clients. A number of advisors in our industry are extending their services, serving as life coaches as well as wealth managers, to help clients make good decisions about how to chart the course of their lives and manage the assets that enable them to achieve their goals.
The results of our survey suggest several areas where life coaching could work hand-in-hand with the financial guidance advisors provide clients.
Helping families have constructive conversations about money
Our survey found that, of the 71% of HNW investors who have children, only 17% have discussed family finances with their kids. Sixty-five percent of investors want their advisors to engage their adult children in such conversations, but only 33% say their advisors currently do so. Even a majority of parents with minority-aged children–53%–want their advisors to speak with their children, and only 16% of investors say their advisor now does so.
The survey also demonstrated the need for such conversations. Sixteen percent of investors have already experienced family conflicts over inheritance and legacy planning issues–an increase since past years of the survey. Another 23% believe such conflicts could arise among family members in the future.
Advisors who don’t ask their clients about these issues are at a disadvantage because few investors will bring such issues to them. Only 31% of investors say they have discussed inheritance and legacy planning issues with their advisors. An even smaller percentage–13%–say they have discussed family conflicts over money with their advisors.
What’s an advisor to do to address these issues? The first step, of course, is to reach out. Advisors have to respect the preferences of their primary client, so through that individual or couple, they can seek permission to begin discussions with children. With minor children, it may be offering to deliver simple lessons on the basics of managing money and a broad overview of what investments do. With adult children, it may be about gaining permission to ask if they already work with an advisor and to determine if they are willing to hear about the services you offer.
The life coaching skills may enter the picture when families are ready to address or avoid the family conflicts that can arise over money. Advisors may feel comfortable leading such discussions on their own, or they may want to work with professionals in their area who are skilled at addressing these sensitive issues with families.
We have partnered with Dr. Richard Orlando of Legacy Capitals to help advisors learn how to have constructive family discussions. One of the key points Dr. Orlando emphasizes is the value of identifying the family’s purpose to their money. While everyone in the family may have considered this, having a structured conversation about the family’s primary goals can help family members develop a clear sense of what they want to do with their wealth. The statement of purpose can be a unifying experience that puts some of the conflicts and disagreements to rest.
Preparing for life’s transitions—especially retirement
The survey also found that, among the HNW investors who are still working, only 24% know when they plan to retire. That may be a testament to how much they enjoy their work, but our experience shows that people who know when they want to retire are better prepared to make the transition.
Here again is where life coaching skills can come into play. Helping people map out broad goals for the full span of their life—and inviting them to imagine what they want to do when work doesn’t consume the majority of their waking hours—can help them be ready for that eventual transition. For affluent investors who may not have to worry about ensuring that they will have a sufficient nest egg, a big part of the planning will focus on how to wisely take distributions from their investments in retirement and how to plan for the legacy they may hope to leave to their families or favorite causes.
Speaking in the clients’ language
The survey rather startingly revealed that HNW investors do not believe their advisors have talked to them about key financial planning topics. Just 43% said they have ever discussed investment strategies with their advisors. Only 26% said they had talked to their advisors about how to finance their health care needs in retirement. A mere 24% said they have ever talked about tax planning with their advisor.
Since conversations are the core of an advisor’s practice, the question is why would clients think they haven’t discussed such matters. The answer may be in the investment jargon we all, after years of training, can’t resist using. Making sure your message is getting through to your clients may require putting on that life coach hat again. Always talk to your clients in plain English. Regularly ask them if they understand what you’ve explained and ask them to repeat back, in their own words, a summary of the approaches you’re recommending. That way, you can ensure if they’re comprehending the course you’ve charted for them—and whether they agree it’s their best course of action.
Good advice does register
The good news from the survey is that the wise guidance every advisor offers clients with long-term goals clearly resonated with the HNW investors we surveyed. In response to the turbulence the markets experienced in 2018, 43% of investors took no action, and another 21% added to their investments to take advantage of the discounted prices. Collectively, that means nearly two-thirds—64%—of the investors had an even-handed response to the market’s volatility. Advisors can take heart in that news. Investors acting wisely through a short-term bout of adversity is clearly evidence of good coaching.
To learn more, read the full report of the Generations Project survey, which includes tips for advisors on how to address the issues it identifies.
Blog header image: Caiaimage/ Trevor Adeiline / Getty Images
Details on the Generations Project survey’s methodology
- 775 HNW investors were interviewed.
- To participate, respondents had to have minimum net investable assets of $500,000 for Millennials and $1 million for all other investors.
- The survey was conducted from January 16 to February 4, 2019.
Invesco commissioned Legacy Capitals LLC, an organization unaffiliated with Invesco Distributors, Inc., for the purposes of providing intellectual capital and Whole Family Advising Workshops.
This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. Invesco is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
This is the fourth annual high-net-worth study conducted by OppenheimerFunds, which commissioned CoreData Research to survey U.S. investors to better understand investment behaviors and attitudes across all generations, the role of family dynamics, and how advisors engage investors. Additional analytical support was provided by Zeldis Research Associates.
On May 24, 2019, Invesco acquired Massachusetts Mutual Life Insurance Company’s asset management affiliate OppenheimerFunds. All research for the Generations Project was conducted prior to May 24, 2019.
The opinions expressed are those of the author as of October 17, 2019, and are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.