Creating generational wealth involves more than just the passing on of financial assets. It’s about nurturing a legacy and preparing the next generation to manage and grow that wealth responsibly. Financial institutions play a pivotal role in guiding and supporting this journey for their consumers, paving the way for a smooth transition and sustained success across generations.

Younger generations may be open to starting out with the same financial institution their parents use, but a study by Cerulli Associates shows that 80% of heirs expect to find a new advisor once they inherit. Instead of losing those heirs as soon as generational wealth is passed, some relationship-building could make the difference and cause them to stay with your financial institution long-term.

A Good Example of Serving an Heir

One real-life example of a credit union stepping up to help with the wealth transfer of a father to his daughter comes from one of our Franklin Madison employees. This employee was 18 years old when her father passed away unexpectedly.

In the wake of her father’s passing, this young woman found herself thrust into the daunting role of executor of his will, facing a labyrinth of financial intricacies she had never encountered. With zero financial acumen and her father having lived across the country, she felt adrift in a sea of uncertainty.

However, thanks to her aunt, the teacher who set up a credit union account for her when she was a child, she was able to find some help. After a lifetime of loyalty to the credit union, she got the IRA inheritance transferred to that organization. But she still had questions she needed answered, such as, “What could the money be used for without penalties? Could it assist in her college journey, and what about the tax implications?”

Feeling overwhelmed and unsure where to turn, she hesitantly sought guidance from the credit union regarding her generational wealth. To her surprise, they not only provided answers but also patiently educated her on the intricacies of the financial landscape, empowering her with the knowledge to ask pertinent questions. Their guidance was delivered with such empathy and understanding that this Franklin Madison employee felt supported and gradually gained confidence in navigating her newfound responsibilities.

Understanding the Customer Journey

Family Introduction

As in the story above, the best introduction for a young person to a financial institution is from a relative who is already a loyal customer. Youth savings accounts and education programs that are designed to teach financial literacy and encourage savings habits provide a secure financial foundation for young individuals.

Before inheriting assets, the younger generation often seeks financial independence and guidance. Banks and credit unions can engage them through educational workshops, interactive platforms, and targeted marketing. A personalized approach, emphasizing mentorship and support, can be key in establishing trust and initiating the relationship.

Attracting the Young Consumer

Here are a few of the strategies that resonate with younger consumers and help them see a financial institution as valuable.

  • Embrace digital-first experiences.
    Prioritize seamless mobile apps and online tools with user-friendly interfaces, and provide personalized dashboards for tracking spending and visualizing goals. Utilize social media to connect with younger consumers, sharing financial tips and engaging content.
  • Prioritize financial literacy.
    Use gamified learning, school partnerships, and free resources like articles and webinars. Additionally, offer personalized guidance with one-on-one consultations from financial advisors who understand individual needs and goals.
  • Offer relevant and flexible products and services.
    Consider the flexibility of your products and services. You may want to offer on-demand services such as microloans, integrations with digital wallets, and relevant insurance products, especially those that appeal to younger consumers.
  • Build trust and authenticity.
    Foster trust through transparent communication about fees and ethical practices. Demonstrate your commitment to social causes, and build community with events and online forums for shared experiences.

Your Role After an Inheritance

An inheritance is often accompanied by grief, stress, and a lack of experience managing significant assets. Here’s how financial institutions can offer support after the inheritance:

Empathy and emotional intelligence:

  • Go to them: It may seem like consumers who are grieving or planning for a loss should be left alone to come to you when they’re ready, but often they struggle knowing where to start. It’s important to meet the consumers where they are. While this probably doesn’t mean showing up in their home with cookies, it could mean personalized solutions to their financial problems showing up in front of them right when they need it the most.
  • Communicate sensitively: Acknowledge the loss and express genuine condolences. Avoid jargon and financial terms that might feel overwhelming, and explain concepts in clear, relatable language.
  • Recommend resources: It could be helpful for your financial institution to have books or other resources to refer to consumers after they have faced a loss. These resources might be financial in nature, or they might even be in the form of grief counselors.

Guidance and planning:

  • Explain inheritance taxes and legal implications: Provide resources and guidance on navigating estate taxes, probate, and legal requirements.
  • Connect them with financial advisors: Recommend advisors who specialize in working with young inheritors and understand their unique needs.
  • Offer financial wellness products like supplemental insurance that can help consumers in times of need so they can save more money instead of using it all on emergency and health expenses.

Proactive communication and support:

  • Schedule check-ins to regularly review their financial situation, update their plan, and address any concerns. Create channels for easy communication and ensure they feel comfortable asking questions without judgment.

Be the Solution Before Your Consumers Know They Need It

Institutions aiming to facilitate the passing on of generational wealth must focus on building relationships, educating, and offering tailored solutions. By being proactive and empathetic, and providing comprehensive and personalized support, they can guide families through this intricate journey, ensuring a smooth transfer of wealth and values across generations.