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Adding new clients should be a family affair

This article first appeared on Professional Adviser on 30 September 2020.


Bringing clients on board in the current environment is a challenge for all advisers. But take a look closer to home: family members of current clients are prime candidates for advice.


Jeremy Mugridge

Jeremy Mugridge

Head of platform proposition

With the announcement of further restrictions for six months businesses across the UK will be thinking about the implications. For many, including the advice profession, going back to working from home, or perhaps just remaining working from home will be nowhere near as logistically challenging as it was the first time around. Throughout this period, most of the advisers we have spoken to have been rightly focused on their current client base and with all the logistical challenges have had little time for anything else.

Now we are speaking to many firms who have the bandwidth and are keen to adopt new clients. However, doing this when they are only allowed to provide remote advice has proved challenging.

And as they can focus their energy on their wider business, there remains the longer term well-known challenge that close to £1 trillion of intergenerational transfers are set to take place between 2017 and 2027, according to the Kings Court Trust. So it is entirely conceivable that advisers will face losing oversight of wealth within families at the same time as business restrictions create challenges to adopting any new clients.

So advisers are facing a two-pronged business dilemma that is putting them at risk, but speaking to advice firms we have seen some identify a simple fix and that is to increase engagement with the family members of your clients.

Evaluating the risk

We have been speaking to a lot of different advice businesses who are grappling with these and similar issues and found there are some easy steps that some firms are taking to help them get to grips with it.

First, they take the opportunity to review the new business they’ve had in the past six months and compare that to previous periods over the last number of years. Every business will be different depending on what stage of maturity they are at and the capacity they have.

Second, they get a rough idea of the intergenerational risks by doing a simple exercise. On a piece of paper write down the following headings:

  • Client name
  • Value of wealth under management
  • Annual fee income
  • Age
  • Spouse/Partner
  • Parents
  • Children
  • Grandchildren

Complete the table rows with your top 10 clients based on the size of their wealth and the level of fees that they pay. Add values in the columns to create totals.

For the four types of family member, indicate with a tick or a cross whether you have a business relationship with them.

The information helps advisers to consider their clients in a new light and consider the business risk associated with them.

  • Concentration risk: How much of the amount of the wealth you manage and the fees you earn is from a few key clients? The death of these clients could expose your business to significant costs without an intergenerational wealth strategy in place.
  • Mortality risk: Are your key clients in the later stages of their lives? The likelihood of death increases the urgency for you to put an intergenerational wealth strategy in place if one does not exist.
  • Retention risk: Do you have a business relationship with your client’s family? A lack of business relationships with those family members could expose your business to significant costs and your intergenerational wealth strategy should focus on building these relationships.

Lots of good businesses do this without thinking, but find they benefit from taken extra time to do a formal review.

The solution

It is vitally important to understand your level of risk so you can think clearly about how to tackle it. The good news is that advisers can easily kill two birds with one stone.

Quilter research with YouGov* reveals there are clear opportunities for advisers to build relationships with clients’ family members.

The vast majority of family members (72%) say they would be happy to be involved in discussing and agreeing on their family’s plan for passing on wealth. This rises to 81% for millennials.

These discussions have a positive impact because if an adviser has worked with a family member on an inheritance plan a family member, 21% would consider using that financial adviser if they were referred to them and 50% might consider them.   

A family referral is not a sure-fire way to gain a new client, particularly if you’ve not engaged with them before, as just 18% would consider an adviser on a family referral alone. However, there is potential.

It is an important door open to advisers and while families are still negotiating the wide-ranging impacts of Covid-19, it is the perfect opportunity to engage and support these potential clients. Even for those advisers who are starting to think about retirement, having relationships with younger generations is vital when it comes to boosting the value of your business.

Aside from the business perspective, this is an opportunity to close the advice gap and ensure more people are gaining valuable financial advice, which is vitally important at this point in time.

The current backdrop of uncertainty and continual financial challenge means the value of advice will be felt more keenly over the next six months and consumers need advice like never before. This makes it a golden time for advisers to showcase what they have to offer.

*The research was commissioned by Quilter and undertaken by YouGov Plc, an independent research agency. All figures, unless otherwise stated, are from YouGov Plc. The total sample size is 1,544 UK adults, comprised of 529 Baby Boomers, 501 Generation Xers and 514 Millennials. Fieldwork was undertaken between 07/07/2020 - 08/07/2020. The survey was carried out online.