Few heirs retain their parents’ wealth advisors, Cerulli’s study found

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for the high-net-worth investor and consumer. subscription To receive future issues, directly to your inbox.

Over the next 25 years, more than $120 trillion in wealth will be passed down to heirs, according to Cerulli Associates.

Only 27% of those future beneficiaries — mostly widows and children — plan to retain a donor’s wealth advisor, according to a Cerulli survey of investors with at least $250,000 in financial assets. The share drops to 20% for those who have already inherited their wealth, according to the report released in September.

However, most heirs are not firing their benefactors’ wealth advisors in favor of self-investing and digital products. When asked why they chose another path, half of those surveyed said they already had their own advisor. The second most common reason, at 28%, was lack of a relationship with a donor advisor. Only 14% said they did not want to work with a financial advisor at all, and 10% said the advisor did not meet their specific investments. needs. Survey participants can choose multiple reasons.

“Keep in mind that if the parents die in their 70s or 80s, the age of the heir is between 40 and 60 years old,” said John McKenna, a research analyst at Cerulli. “In most of these cases, they have matured into wealth management clients. They have relationships, and they will gradually add to their existing relationships rather than starting a new relationship with an old advisor.”

And on their part are the benefactors who Cerulli found that those planning to pass on their wealth were largely ambivalent about whether their heirs used the same advisors despite saying they were largely satisfied with their service. While just over a quarter of those surveyed said they would like their heirs to retain their advisor, more than half said they were not sure or that it was up to their beneficiaries. Seven percent said they did not want their heirs to use their advisor, the most common reason being that the two parties did not already have a relationship.

The crux of the problem, according to Scott Smith, Cerulli’s senior director of advice relationships, is that clients are often reluctant to discuss their estate plans with their families. Even among investors with financial assets of more than $5 million, 20% said they intend for their heirs to know about their wealth after their death. The actual number of procrastinators is likely higher, with 34% of high-net-worth heirs saying they were told these details after the donor’s death.

“Donors believe they will talk to their next generation about these things before they die,” Smith said. “But when we ask the next generation, those conversations are not happening.”

As a result, counselors may have few opportunities to talk to their clients’ children and explain what they can offer, Smith says. He said it’s up to the counselor to encourage clients to stop putting off uncomfortable discussions.

“Reinforce it with primary contact which is important for survivors to get involved early so that their feet are securely on the ground and they don’t panic once it happens,” he said. “It’s not just that we’re trying to preserve assets. We’re trying to make it easier for survivors when they pass.”