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Advisor News Bringing clients’ children on board is not without challenges

Many parents have trouble giving their children space to work with their advisors alone, free of influence. Thus, advisors have to set boundaries with the parents to maintain the children’s autonomy and privacy.

STEVE DEBENPORT/iStockPhoto / Getty Images

Baby boomer clients, many of whom are now in or entering retirement, will be passing their wealth down to younger generations during the course of the next 20 to 25 years. Financial advisors across Canada can get ahead of the process and keep those assets in house by working with their clients’ children from a young age – often at a reduced rate.

This strategy is not without its challenges, though. Bringing children of long-term clients on board as clients themselves can be a tricky endeavour to navigate for various reasons, advisors say.

For example, many parents have trouble giving their children space to work with their advisors alone, free of influence. Janine Purves, senior financial advisor at Assante Capital Management Ltd. in Richmond Hill, Ont., says clients frequently request that she send certain messages to their children or enforce specific financial rules. She often has to set boundaries with the parents to maintain the children’s autonomy and privacy.

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“What I tell the parents is, if I’m taking care of this child, then I’m responsible to the child,” Ms. Purves says. “They have to recognize that it’s the child’s objectives I have to meet.”

Similarly, parents often expect that their advisor is able to force their children to do something. As such, Ms. Purves says she’s frequently reminding parents that her role as an advisor is limited: she can give advice and check in with the children clients, but whether they ultimately follow through is beyond her control.

“If the kids aren’t ready to hear something, they’re not going to listen,” she says.

Advisors also note that much like any young client, many clients’ children face a steep learning curve when they begin working with an advisor. Trixie Rowein, financial advisor and portfolio manager with the Howden Rowein Group at Raymond James Ltd. in Edmonton, says some clients’ children have a hard time developing trust in their advisor – especially if the relationship began due to pressure from the parents rather than their own genuine interest. And other clients’ children may come in expecting higher returns than are realistic, Ms. Rowein says, which requires managing expectations.

David Burnie, advising representative and chief compliance officer at Sona Wealth Counsel Inc. in Ottawa, says many young clients come into his office with preconceived notions about finances that they’ve picked up on blogs or from friends, which may not be true. It’s his role as an advisor to help them shake these ideas.

“It really becomes an exercise in education, I find,” Mr. Burnie says. “There’s so much myth and folklore out there, what you should or should not be doing. And, of course, young adults, they’ve just finished high school, they may be in university, they’re all pretty smart and they do a lot of reading, and they read something and kind of latch onto it.”

Other advisors say they have to take time to teach younger clients even more basic principles about spending and saving. Graham Stanley, senior vice-president and portfolio manager with the Stanley Asset Management team at Canaccord Genuity Wealth Management in Vancouver, says young clients across the board are more likely to spend frivolously, regardless of their parents’ net wealth, as they lack the life experience to understand the consequences of poor budgeting.

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“It’s important to help train young clients, even if they come from affluent families, to save, invest and think about building their financial lives,” Mr. Stanley says. “Not just to spend now on their social lives.”

Teaching any of these basic principles can be time-consuming and often frustrating. But Ms. Purves says she’s found teaching these lessons to clients’ children in group settings to be, at times, more effective than doing so on a one-on-one basis.

For this reason, she periodically holds workshops on personal finance for her clients’ young adult children, during which she asks participants to share their own challenges with money, difficult situations they’ve found themselves in and lessons they’ve learned as a result. By giving participants space to open up to one another, rather than lecturing them on the basics of financial planning, many walk away more knowledgeable and comfortable with the idea of budgeting.

“The idea is that they learn from each other, it’s not just about me spewing stuff,” Ms. Purves says.

Many former participants in these workshops have gone on to achieve financial success, she adds, including one who had severe credit card debt from a young age and ended up pulling herself out of it over the course of several years. This former workshop participant has since become a client.

Ms. Purves underscores the importance of using creative tools to connect with younger clients – beyond hosting workshops. She also suggests using online tools, such as email newsletters and budgeting apps, to keep them informed and teach them about personal finance skills.

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Both Ms. Purves and Ms. Rowein say it can be easy to overlook the importance of these tools when working with clients’ children as many advisors tend to assume the children have a similar investment preference or a similar communication style as their parents.

“Be mindful to always ask what they like,” Ms. Rowein says. “They appreciate that I don’t assume they’re exactly like their parents.”

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