The Future of Financial Planning: Holistic and Multigenerational

In today's rapidly evolving financial landscape, successful financial advisors are those who go beyond traditional investment management. They understand that a comprehensive approach to financial planning can significantly enhance client loyalty, satisfaction, and retention.

A Holistic Approach to Financial Planning

A holistic approach to financial advice is designed to address the multifaceted challenges investors face. Instead of treating investments, taxes, and estate planning as separate issues, holistic financial planning integrates them into a cohesive strategy. This ensures that all financial elements work together efficiently, reducing risk and optimizing long-term outcomes.

Many advisors find that this value-added approach helps them build better relationships with their clients, deliver superior service, and reduce attrition rates. It also sets them apart from do-it-yourself and robo models, which often rely on mass-market financial advice based on averages rather than the unique circumstances of each client.

Affluent Investors Turn to Holistic Financial Advice

McKinsey’s 2024 Affluent and High-Net-Worth Consumer Survey of U.S. investors reveals a significant shift in the preferences of affluent clients. As they age, their financial needs become more complex, and they increasingly seek holistic advice. The survey indicates that the share of investors seeking more comprehensive planning services grew from 29% in 2018 to 52% in 2023. A financial advisor can be instrumental in creating a plan that aligns with their broader objectives, lowers unnecessary risks, and optimizes wealth for future generations.

Affluent investors are turning to holistic financial advice because traditional investment-focused strategies no longer provide the necessary protection or long-term financial security.¹ As wealth grows, financial decisions become more intricate, requiring a strategy that goes beyond maximizing portfolio returns. From tax optimization and estate planning to risk management and socially responsible investing, investors need a framework that aligns with their personal and financial aspirations.

Holistic financial advice can integrate every facet of wealth, including investments, taxes, social impact, and legacy planning into one cohesive strategy. This enables investors to navigate uncertainty, align their financial decisions with their personal values and long-term goals, and preserve multigenerational wealth.

The Great Wealth Transfer

The Great Wealth Transfer is a significant trend that financial advisors cannot afford to ignore. Cerulli projects that wealth transferred through 2048 will total $124 trillion, with $105 trillion expected to flow to heirs and $18 trillion to charity.² Nearly $100 trillion will be transferred from Baby Boomers and older generations, representing 81% of all transfers.

Amidst this accelerating wealth transfer, it is crucial for advisors, their firms, asset managers, and other industry participants to balance best practices with current clients while shifting their service and product strategies to meet the needs of the future high-net-worth demographic. This demographic shift presents both challenges and opportunities, and advisors who are prepared to adapt will be better positioned to succeed.

The Benefits of Multigenerational Financial Planning

Financial plans are designed to be long-term tools, often culminating in a legacy for loved ones. This makes them a natural gateway for building multigenerational connections. Millennial clients, in particular, are eager to connect with financial advisors and are willing to pay for the advice they receive.

According to the Cerulli report "Millennials Want More Advice — And Are Willing to Pay for It," 59% of millennials identify as advice seekers who want more financial advice than they currently receive. They are interested in new ideas and are willing to invest in professional guidance. With 72 million people, millennials are the largest adult cohort and have 25% more wealth than Generation X and Baby Boomers had at the same age.

Advisors should get their clients' children involved in planning decisions as early as possible. This is especially true for millennial investors who are approaching their 40s and are coming into money. Involving younger generations in financial planning meetings is not just a matter of passing the torch; it's a strategic move that can benefit both the advisor and the client.

Family meetings and regular communication are considered the most effective wealth transfer planning strategies by high-net-worth practices. You might also consider offering flat fee financial planning services to attract younger clients who may have lower AUM but are eager to start building their financial foundation. This can create new revenue streams and build a pipeline of future high-net-worth clients.

Here are some key advantages of involving the younger generations in the planning process:

• Building Trust and Continuity: Engaging the next generation in financial planning helps build trust and ensures a smooth transition of wealth. Younger family members are more likely to continue working with the same advisor if they feel included and valued from the beginning.
• Educating: Regular family meetings provide a platform for educating younger generations about financial management, investment strategies, and the importance of long-term planning.
• Strengthening Client Relationships: Involving the entire family in the planning process can strengthen the advisor's relationship with the primary client. It demonstrates a commitment to the family's long-term success and can lead to more referrals and a broader client base.
• Creating a Legacy: Multigenerational planning helps clients create a lasting legacy that aligns with their values and goals. By involving younger family members, clients can ensure that their wealth is used to support the causes and people they care about most.

The Future of Financial Planning

The future of financial planning is holistic and multigenerational. As the wealth transfer from baby boomers to younger generations continues, advisors who can provide comprehensive, personalized advice will be in high demand. The Bureau of Labor Statistics projects a 17% growth in employment for personal financial advisors from 2023 to 2033, driven by the increasing complexity of financial needs and the desire for more integrated planning services.

The Great Wealth Transfer presents a unique opportunity to engage younger generations and create a legacy of financial well-being. To stay ahead of the curve, advisors must be proactive in adopting a holistic approach and engaging younger clients. With the right strategies and support, you can meet the evolving needs of your clients and capture the loyalty of the next generations.

How LPL Financial Can Help

If you're interested in adopting a more comprehensive financial planning model but are unsure how to find the time or resources to support it, LPL Financial can be your strategic partner. We offer a range of tools and resources to help you implement and scale holistic financial planning in your business. From advanced technology platforms to educational materials and support services, LPL is committed to helping you provide the best possible service to your clients.

Contact LPL today to explore how we can help you navigate the challenges and opportunities of the Great Wealth Transfer and build a practice that thrives in the future. Together, we can ensure that your clients' financial plans are not just comprehensive but also deeply personal and aligned with their long-term goals.