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Only 19% of Investors Work With Their Parents' Advisor: Cerulli

By Michael S. Fischer

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What You Need to Know

  • Maintaining a relationship across generations is advantageous for both investors and the advisory firm itself.
  • Younger clients eventually will want more than what is being offered to them and will be willing to pay for it.
  • Having family-level conversations can smooth potential future trouble spots around inheritance or support.

Only a fifth of affluent investors use the same advisor as their parents, according to research released Tuesday by Cerulli Associates.

It behooves advisors to reinforce the value of their services both early in client relationships and in difficult periods in order to bolster and retain those ties for the long term, Cerulli said.

Maintaining a relationship across generations is advantageous for both investors and the advisory firm itself, Cerulli said. Young investors receive the benefits of an advisor who is familiar with the family’s financial situation, and the advisor has an opportunity to preserve the account for the next generation. 

Despite the benefits, Cerulli’s research found that 92% of affluent investors who use their own advisor did not consider their parents’ advisor in their selection process. Six percent did consider their parents’ advisor but chose another one who better met their needs. And 4% started out with their parents’ advisor but switched to one who met their needs.

Although just 19% of respondents overall said they used their parents’ advisor, the share increases substantially among younger investors, with 41% of those younger than 30 using the same advisory firm as their parents.

The Cerulli study noted that there is an inherent advantage to bringing a client’s younger family members into the advisory relationship and potentially setting them up with their own advisor. But it also suggested that the advisory firm should ascertain whether that relationship is simply a matter of convenience or the result of active choice.

Younger clients, it said, may accept limited levels of financial advice at the start of the relationship but eventually will want more than what is being offered to them and will be willing to pay for it.

Cerulli classified 38% of respondents who use their parents’ advisors as Advice Seekers in its behavioral advice segments, compared with just 15% of Advice Seekers who have their own advisors. According to Cerulli, Advice Seekers generally are highly optimistic and open to new investment options. They are willing to pay for advice and cede discretion, and they prefer high advisor engagement. Moreover, these investors are more actively engaged in their personal finances.

“While they may begin as a sort of ‘marriage of convenience,’ advisors can create long-lasting relationships with their clients’ children,” Cerulli research analyst John McKenna said in a statement. “Advisors whose clients have financially interested children should work with them — either helping them with their own financial plans or directing someone else within the firm whose life experiences align with these clients to join the advising team.” 

For parents, having family-level conversations can smooth potential future trouble spots around inheritance or financial support if misfortune should befall either generation.  

“More than ever, involvement in financial discussions for wealth planning is becoming a ‘need to have’ rather than a ‘nice to have,’ and with an increasingly affluent millennial demographic, advisors cannot afford to squander such business-expanding opportunities,” McKenna said. 

Michael S. Fischer

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