What the 'horizontal wealth transfer' means for RIAs

Amid the wealth management debate on how best to retain next-gen clients amid the great wealth transfer, a lesser-known trend is gaining traction.

RFG Advisory

A subset of the hundreds of trillions of dollars expected to pass from boomers to Gen X, millennial and Gen Z heirs in coming decades, the "horizontal wealth transfer" refers to the $54 trillion expected to first pass to surviving spouses before reaching the next generation, according to the 2024 Global Wealth Report from UBS.

Women clients are at the center of these overlapping trends, with a Cerulli study finding that nearly $40 trillion of these intraspousal transfers will go to older widows — even as women in all demographics continue to earn and control a greater slice of U.S. wealth.

Add to that upwards of 70% of next-gen clients expected to switch financial advisors after receiving their inheritance, according to Cerulli, and it's clear that the future of the RIA sector is in the balance. 

To stay relevant, advisory firms must adapt. Here are suggestions on how to retain existing clients while also appealing to next-gen heirs and female spouses and widows.

Be digitally savvy

Anyone who's been around millennials or Gen Z knows that they live in a digital-first world — try calling one and they'll likely respond via text! 

To cater to this massive generational shift, advisors should ensure that a client's financial information is easily accessible via mobile apps and interactive dashboards. Next-gen clients will appreciate real-time insights, presented in an easily understandable way, as will women clients, who often take longer to build trust with a financial advisor than men, according to a State Street Global Advisor study. 

READ MORE: Clients want more from financial services apps, websites

It's also wise to offer virtual meetings and digital-first options for consultations. Not every prospect will choose online meetings over an in-person one, but giving them the option can enhance the client experience.

Get social

Engage with younger clients where they're most comfortable — on social media.  

Consider developing a presence on the platforms where they're most active, such as Instagram, TikTok and LinkedIn, and pay heed to a recent Pew study that highlights the growing influence of women on social media platforms like Pinterest (51% female to 19% male), TikTok (39% female to 26% male) and Instagram (55% female to 44% males). 

In the same vein, explore other creative digital approaches to make connections, like hosting live Q&A sessions or educational webinars through Facebook Live or a YouTube channel. 

Embrace AI

RIAs with the latest technology will be better poised to retain existing clients and onboard younger ones. Artificial intelligence tools can analyze spending habits, risk tolerance or broader financial goals in order to create tailored investment plans. AI can also assist advisors in identifying prospects that match a specific client profile. 

Predictive analytics are another great tool for advisors to lean into. When implemented thoughtfully, this type of advanced tech can anticipate client needs and help advisors deliver bespoke experiences that will resonate with the next generation of heirs and surviving spouses. 

READ MORE: Expanded offerings draw prospects, advisors say

For example, predictive analytics and AI tools might reveal that a prospect is involved in an environmental group, art club or serves on the board of a charitable organization. Understanding these aspects of her life and connecting in ways that align with her values can make all the difference in securing new business. 

Use hyper-personalized communication

Advisors wishing to stay ahead of the curve will make it their business to understand what truly matters to each client, delivering a hyperpersonalized experience.  

Younger clients' financial aspirations and priorities, for instance, can range from travel and amassing life experiences to implementing ESG values in their portfolios. Surviving spouses, on the other hand, may prioritize learning new skills and may wish to concentrate on transfer-of-wealth strategies or family coaching to help them understand their estate-planning process.

That goes for prospects as well. One of our advisors recently attended a tour of a winery where he met a group of widowed women. As a follow up to this event, he created a bespoke wine tasting event and invited the women he'd met on the outing and their friends. As a result, he gained four new clients!  

It's crucial to engage with heirs and spouses early on — long before they inherit any wealth — by including them in discussions around legacy planning. By building trust and familiarity ahead of time, advisors increase the chances that these younger clients and surviving spouses will remain loyal once the wealth is transferred.