Working with ultra-high-net-worth (UHNW) clients, while the goal of many advisors, brings unique challenges, though not necessarily of the negative variety.
Obviously, those in the UNHW crowd possess significant wealth and from that, it’s reasonable to infer they’re entrepreneurial, highly educated, sophisticated in multiple pursuits beyond investing or all of the above. There’s also apprehension among advisors that some in the UHNW crowd are less receptive to advice/guidance because they’re accomplished in other fields.
It’s not an unreasonable feeling to have, but it’s also largely alleviated when a UHNW individual or family transitions to client from prospect. After all, if they’re clients, they’re likely there because they want advice. In some cases, advice can morph into encouragement and that’s an important point because for as intelligent and wealthy as UHNW folks are, they’re not having some crucial money-related conversations with their heirs.
One area where the ultra-wealthy need some prodding is having discussions with spouses, children and other heirs regarding what becomes of the wealth they worked so hard to build when they pass on because, believe it or not, these conversations aren’t taking place at the levels they ought to be.
Great Wealth Transfer Dichotomy
The fact that some of the most affluent clients aren’t discussing with family where their money goes when they die is stunning when considering how much attention the great wealth transfer generates.
New research from Fidelity confirms two things. First, the great wealth transfer is top-of-mind for many UHNW baby boomers. In fact, it’s the top conversation they want to have, but less than half provided pertinent, related information to beneficiaries. Making this scenario all the more interesting is that those in the UHNW are less willing to engage in these chats with heirs than are their counterparts in the mass affluent high-net-worth (MAHNW) cohort.
“Wealth transfer is the most relevant topic for UHNW baby boomers, yet it ranks 10th in relevance for their MA-HNW peers. This large gap reinforces the relationship between greater wealth and a focus on wealth transfer,” observes Fidelity. “Although wealth transfer is the most relevant topic for UHNW parents, it is also one of the topics they are most unwilling to talk with their children about. ”
Compounding the problem while highlighting the need for advisors to engage in some gentle prodding are data confirming that UHNW clients are avoiding other later-in-life/estate planning conversations with their children, including long-term care plans.
“Planning for health and care decisions is the second-lowest-ranked topic of relevance for UHNW baby boomers but the third-highest-ranked topic for MA-HNW baby boomers, indicating a different financial focus around health and care needs,” adds Fidelity.
Moving Past ‘Yes, But’
Interestingly, the Fidelity study indicates many UHNW clients have performed steps such as designating beneficiaries and establishing trusts and wills, but they’re holding back details from their kids. That is to say a lot answers to advisors’ questions start with “Yes, but…”
As in “Yes, I’ve established beneficiaries, but I’m not telling them yet because I still want them to work hard and not think about a big payday. ” It’s certainly admirable that any client, regardless of wealth level, doesn’t want their heirs to be disincentivized, but there are ways to drive the message home while allaying clients’ concerns.
“As their advisor, you can help them break the complexity into manageable parts. Ask your clients about individual topics they would like to talk about with their spouses and children,” concludes Fidelity. “Coach them to invite their family members to identify topics they would like to talk about. And keep track of a continuing agenda that will build conversational momentum and confidence through time. ”
