Wealth industry faces huge shift as boomers transfer wealth to their kids

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This is part of the Globe and Mail's week-long series on baby boomers and how their spending, investing, health and lifestyle decisions could affect Canada's economy in the next 15 years. Is Canada ready for the boom?

For more, visit tgam.ca/boomershift and on Twitter at #GlobeBoomers.

Over the next several decades, wealth managers in Canada will be battling a massive shift in wealth as billions of dollars are set to pass from boomers into the hands of the younger generation.

For the investment industry, this intergenerational wealth transfer could be detrimental – as at least 75 per cent of assets under management leave a firm after an heir receives his or her inheritance, according to research by consulting firm Accenture.

Investment firms will face the difficult challenge of retaining the assets of boomers, while also developing a business proposition that appeals to the next generation of tech-savvy clients.

Andrew Marsh, chief executive officer of Richardson GMP, is already preparing for the next wave of investors. With $28-billion in assets under management, retaining those assets are top of mind for the 195 adviser teams at the firm.

"The best advisers in the industry already have an intergenerational approach and if they don't – they should," says Mr. Marsh. "The problem for many wealth managers is the disconnect they have with the younger generation, who are less likely to be working with a financial adviser."

Many investors whose assets are less than $100,000 don't hit the minimum account size to be serviced by a financial adviser working with a brokerage.

To close the gap for his advisers, Mr. Marsh is building an automated platform, similar to a robo-adviser, to allow smaller accounts to be managed more efficiently. As a client's net worth grows – and their financial planning needs increase – the client can shift onto the full-service adviser platform.

"This is where automation can really help," Mr. Marsh says. "The adviser will be able to take on their client's family member and provide really good advice – but in a way that is fee effective and low maintenance."

While boomers tend to be more comfortable with face-to-face meetings with the adviser managing their money, members of the younger generation are turning to more technology-based options, says Sybil Verch, a portfolio manager and investment adviser at Raymond James Ltd.

In keeping with the times, Ms. Verch has expanded her communication with clients and their family members to include video calls through Skype and social-media postings on Twitter, LinkedIn and Facebook.

"Staying in touch with the children is a key aspect of estate planning and after that initial family meeting, it is up to the adviser to customize that contact and frequency to ensure that method of communication works for everyone," Ms. Verch says.

Canada's big banks recognize that the wealth transfer from boomers to the next generation has become a huge issue, but they believe that they're in a good competitive position because of their large size and the wide selection of products and services they can offer to clients.

The challenge, though, is to stay relevant given the fact that the transfer involves generations that tend to take a very different approach to money and retirement than previous generations, creating different strategies to wealth management.

"If that's what clients are thinking about, worried about, wondering about, we need to ensure that we are relevant in those conversations and that we are organized in a way that we can help them achieve what they are trying to achieve," said Dave Kelly, Toronto Dominion-Bank's senior vice-president, TD Wealth Private Wealth Management.

The answer: Accept that boomers might want to transfer part of their savings to their children during their retirement years, so that they can see that money being put to use; and work with the millennial generation, which can be far more engaged with digital banking and take a more hands-on, collaborative approach to wealth management.

"For previous generations, the issue was 'How do I build a significant amount of wealth to be able to pass it along to my children and their children?'" said Glen Gowland, head of Canadian wealth management at Bank of Nova Scotia.

Now, philanthropic giving is on the rise, especially among ultrahigh net worth clients, and there's also the urge to spend money on activities that involve the next generation – driving the need for different conversations and approaches to wealth management in order to keep families as clients.

The banks see themselves as well positioned here, but are aware that technology and generational shifts in views toward wealth management can bring challenges.

"The world around us is changing," said Janet Peddigrew, Bank of Montreal's managing director of BMO private banking. "There are a lot of niche service providers, and I would say in the financial services industry we are well aware of that and we are not taking what we have for granted."