The kids are all right

(November 2006) Although there’s some lip service in the industry paid to intergenerational planning as a means of keeping client assets on the books at the end of the estate planning cycle, not many advisors actively seek introductions to the next generation of would-be clients.

It’s a pity too – younger clients, many times, are still in the accumulating stages of their financial plans and will be for many years to come. And building a younger client base of active savers might be what makes your practice attractive to a would-be successor when the time comes to sell your book.

Your client’s children – young adults specifically – are also smarter than you might think when it comes to money, and could well prove to be the whiplash generation of savers that emerges in the wake of rampant consumer spending that will leave many of their parents working well into their 70s.

Finally, children who are even younger – those in the pre- and post-secondary school systems – also offer a host of financial planning and relationship building opportunities in the way of tax advice for parents and savings and financial education (hint: they’re not getting fiscal responsibility training in school).

Research conducted by market research firm, Corporate Insights, suggests that clients are positively inclined to give referrals but few advisors are actually asking for them. When it comes to intergenerational referrals and planning opportunities, the numbers are even more striking – about half of the high net worth clients surveyed by the firm say they would be willing to introduce their financial advisors to other family members, but fewer than 25% have been approached. "That’s a big topic in the industry," says Corporate Insights vice president, Price Powell. "Clients are willing to do that, but investment advisors are not mining it."

If you’re short on material to talk about, read on. There are a number of interesting child-related strategies and recommendations you can make to would-be clients, no matter what their circumstances.

Teaching kids about money: Surveys suggest six out of 10 Canadian parents and grandparents are concerned their children won’t be able to properly handle money when they grow up. Given current consumer debt levels and savings rates, credit counsellors say the findings are not a surprise, but there are ways parents can help educate their children and boost their financial literacy levels.

You’re grounded! Help HNW clients with their affluent teens: If you’re an advisor with wealth and ultra-wealthy clients you’ve likely been faced with the prospect of offering those clients financial advice regarding their children.

Get them while they’re young! This article, entitled Credit Check: Smarter holiday spending, urges consumers to practice caution and plan before heading to the malls this holiday season and discusses when parents should start talking about money with their children to help them learn about the concept of money as a finite resource.

Beyond RESPs: Financial planning for children: Parents and grandparents always want the best for their kids. Although education planning can sometimes take a backseat to more profitable retirement-planning and sales opportunities, top sales people say RESPs and other education savings plans are an invaluable part of their practice strategies: They are the lynchpin in their plans to build and develop a “cradle-to-grave” business serving more than one generation of clients.

Beyond RESPs: Insurance, sales strategies and tax planning:Once families have made the most of RESP contributions to collect government grants, they may be ready to look at insurance products or family trusts as another set of savings options to fund a child’s education.

RESP knowledge still lacking, survey reveals: Despite the fact the federal government of Canada is practically giving away money to parents who save for their children’s education, more than half say they have not opened a Registered Education Savings Plan (RESP).

Tax tips for students: Trying to help students out during tax time is not the most productive use of time from a practice profitability point of view, but the effort spent serving your client’s children can pay dividends down the road.

Students need to balance their books:So your clients are preparing to send their kids off to school. They have followed your planning to the letter, saving up for the big day and the even bigger bills, but are their children prepared for the real world? Are they about to ration their spending wisely, or will they blow through their education funds before Christmas?

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Filed by Kate McCaffery Advisor.ca, kate.mccaffery@advisor.rogers.com

(11/20/06)

Kate McCaffery