Why Hire a Financial Service Your Kids Will Want to Fire?

When hiring a financial service provider, you have more than yourself in mind. You think about your children and grandchildren, and how the teams and systems you implement now can help them preserve generational wealth, philanthropic purpose, and the legacy of your family name.

However, despite the good intentions of generations assembling or hiring a wealth management team, many family office relationships don't survive generational transitions. Approximately 70% of children who inherit wealth from families with a financial advisor end up transitioning from their provider, according to an Institute for Private Investors report. 

There are glaring reasons to avoid this upheaval, if possible. While may be relatively autonomous in your decision-making, your inheriting generations will likely spread responsibilities among several stakeholders. An overhaul of the financial support structure years from now opens the door for breakdowns in communication, distrust, discord, and even legal disputes—not to mention poor performance from the team they hire.

We contend that, as you assemble or hire a family office or another type of wealth management team, you need to anticipate your descendants’ needs, viewpoints, and apprehensions, to maximize the chances of a multi-generational relationship between your family and your financial team.

To that point, let’s examine leading reasons children fire the team they inherit, to use those cautionary tales to make a successful, lasting hire now.

Generational differences in values

When inheriting generations have convictions  from predecessors, and the financial provider fails to understand and facilitate those values, it can create a mismatch between family and team.

For instance, next generations may emphasize impact investing—choosing assets that contribute to global good—and ESG measures that filter assets for environmental or social ramifications. In contrast, the wealth management team may be used to a more traditional approach to investing, focused solely on financial returns at any cost.

Theoretically this shouldn’t be an insurmountable challenge, because the team works in service to the family, so it should be as simple as recognizing and implementing the family’s revised objectives. But if younger generations don’t know that the financial staff has wherewithal and experience in meeting these objectives, they may be tempted to start shopping for a new provider.

It’s imperative that a family office or other financial service team talk with younger generations about their capacity to carry out values-based investment, even if it’s not something the family currently asks of the provider, so that younger generations know the team is ready to grow with them over the years and carry out their objectives.

Failure to innovate

Families may be inclined to leave providers who don’t show continuous improvement with technology and  innovation—keeping up with latest trends and advancements. We see today’s inheriting generations, for instance, parting ways with partners who don’t offer online platforms for investment management, real-time reporting and analytics, and communication.

We’re sympathetic to the wealth management team that gets accustomed to delivering services in old-school fashion, with reliance on in-person meetings and paper-based reports. But younger relatives may seek providers who prove they haven’t grown stagnant with innovation. Choose a multi-generational team with a record of changing with the times and modernizing tools to minimize .

No diversity in identity or thought

Younger generations may grow annoyed with financial teams who seem stuck in a particular way of thinking.

Single-family offices are especially susceptible to intellectual stagnancy due to their insular work model—serving just one family—that lends itself to unchallenged group think. So one way a family can avoid this lack of creativity is to choose a structure for wealth management where the staff serves more than a singular family and accrues more varied experience.

It also helps to find a provider that offers a range of voices in terms of identity and experience—for instance, a team that isn’t overwhelmingly male-dominated.

Slow or no digital communication

Expanding on an earlier point, we all realize that, on average, the younger the generation, the higher the tendency to communicate digitally. There’s demand for providers who are responsive to email, instant messaging, and social media platforms, such as LinkedIn.

This can be a challenge for the wealth management team accustomed to in-person meetings and phone calls. Even if a family’s current leadership prefers  a low-tech approach, it’s good to know what methods of communication the team offers other clients or what they have capacity for in the future.

No personalization in investment and care

Younger generations are known to place heightened value on personalized options and may dismiss a one-size-fits-all approach to wealth management that doesn’t account for their unique needs and preferences. They may prefer providers who offer customized investment portfolios, tailored tax-planning strategies, and bespoke estate planning solutions.

It’s important to choose financial service providers that make customization a hallmark of their operations if there’s an intent to have a multi-generational relationship with that provider.

Lack of transparency around fees

While this isn’t the case for every family, sometimes younger generations prove more cost-conscious than their predecessors or more skeptical toward financial institutions, so they’ll push for greater transparency about fees and charges. If they suspect the wealth management team is or has been excessive in its charges, they will lose trust and want to make a transition.

It’s best to choose a wealth management team that can communicate with younger generations on a range of family financial matters, including the structure of their business model and the ways in which they behave as a fiduciary for the family. 

Low access to alternative investments

Younger generations with a growth mindset may be intrigued by alternative investments, like private equity, venture capital, and real estate, and want providers with more diversity in these asset classes.

If the wealth management team selected by their predecessors doesn’t seem attuned and able to outpace the market, or if they lack connections in the world of private equity and private opportunities, then the family’s newer leaders will look for a more assertive provider.

By selecting a wealth management team with a proven ability to outpace the market through a range of asset classes, a family increases the chances of maintaining a multi-generational relationship with a nimble partner.

Lack of succession planning

Finally, younger generations may be concerned by the lack of succession planning for its own future. There’s no way to ensure a multi-gen partnership if the family office doesn’t continue to exist, let alone maintain a steady ethos.

It’s a cultural issue, too. Younger generations will naturally want an office that has its own younger generations—experts who communicate as peers and don’t behave as older authority figures. They’re likely to stay with the office that will continue to pass the baton and evolve, just as the family will.

How to Hire a Wealth Team Your Kids Won’t Fire

When it comes to forming or hiring a wealth management team for your family, remember that the long term matters if you want to protect family unity. Here are a few practical steps you can take to ensure that your relationship with a provider survives generational transitions and promotes stability:

• Prioritize communication: Talk, talk, talk. Onboard your relatives with your hire, or take time to articulate your reasons for a past selection you’ve retained for so many years. Make sure everyone understands the provider’s services and strengths.

• Consider generational perspectives: You don’t have to agree with your descendants’ every last view in order to anticipate their future behavior. When younger family members may have different objectives, take these into account now when selecting a team or making a transition while you remain in leadership. Look for a provider that’s flexible and responsive to changing priorities over time.

• Plan for generational transitions: Develop a succession plan and ensure that younger family members are involved in the relationship with your ealth management team from an early stage. By involving the next generation and preparing for transitions already, you increase the likelihood that your family office relationship is one your kids will keep.

By taking these steps, you can make your financial services relationship one that promotes stability and continuity over the long term as you build a multi-generational legacy of purpose.