We’ve all been hearing about the “great transfer of wealth” that is and will continue to occur over the next decade. The sum of wealth is absolutely enormous and represents a quite literal shift in generations, as a new generation takes the baton to address the challenges ahead.

The transfer of wealth from one generation to the next is an inevitable part of life, and its implications reach far beyond familial connections. Financial institutions, including banks, investment firms, and wealth management entities, have a vested interest in understanding and addressing the dynamics of inheritance.

The financial institutions that can be value add in this transfer of wealth will win a portion of one of the largest economic transitions in world history.

So what exactly do financial institutions need to do?

We’ve noted a few things that experts have told us:

Heed Wealth Transfer Dynamics

Inheritance involves the transfer of assets, property, and wealth. Your financial institution needs to play a role in facilitating this transfer process, from managing accounts, investments, and estates, ensuring a smooth transition of wealth to beneficiaries. Understanding these dynamics enables institutions to offer tailored services that cater to the specific needs of both the benefactors and beneficiaries.

Focus on Client Relationships for Retention

Inheritance often leads to the involvement of multiple stakeholders, including heirs, executors, and trustees. Financial institutions that actively engage with families during these transitions build stronger relationships and reduce churn. By offering guidance, support, and personalized financial strategies, these institutions can solidify their position as trusted advisors, leading to enhanced client retention and loyalty. The biggest mistake an institution can do here is to add friction or an unpleasant experience when it comes to a process that already has a large burden on the client and their family.

Offer Investment and Asset Management

Inherited wealth can significantly impact investment portfolios and asset management strategies. Financial institutions need to adapt their services to align with the changing objectives and risk profiles of the beneficiaries. Whether it involves restructuring investments or offering diversified portfolios, institutions must be equipped to handle these shifts effectively. The next generation will in all likelihood have a different set of needs for how they want their assets to be used. Your financial institution needs to be flexible and offer high value services, like complimentary portfolio rebalances and investment guidance.

Help with Taxes

Inheritance often raises complex estate planning and tax-related issues. One of the most valuable roles a financial institution can play a pivotal role in is guiding families through tax intricacies. By providing expert advice on tax implications, trusts, and estate planning, these institutions offer invaluable support in maximizing the value of the inherited assets.

The Bottom Line

A proactive approach to inheritance can unlock new business opportunities for financial institutions, but only if it’s done right. Only if there is care and empathy behind the services that put the client at the center. By offering specialized services tailored to the needs of beneficiaries, institutions can expand their client base and tap into a market segment seeking guidance and support during these transitions.

Inheritance is a pivotal aspect that deeply influences the operations and services of financial institutions. Recognizing its significance allows these institutions to not only provide better services but also build enduring relationships with their clients. By adapting their strategies and offering tailored solutions, financial institutions can position themselves as trusted partners in the wealth transfer.

Understanding the intricate dynamics of inheritance isn’t just about financial transactions - it’s about fostering relationships, preserving legacies, and showing your financial institution actually cares about the client. What better time to show you care than when a family is going through one of their most difficult periods?