The Great Wealth Transfer - PowerPoint Presentation

The Great Wealth Transfer Building Trust that Lasts

Agenda 1 Where your business is most vulnerable 2How family dynamics impact your ability to connect 3 Your plan to minimize risk

WHERE YOUR BUSINESS IS MOST VULNERABLE

$24 Trillion Will be transferred in the next 12 years Source: Deloitte Center for Financial Services 2015 research report, “the future of wealth in the United States”.

Cerulli Associates, in partnership with the Investments & Wealth Institute (formerly IMCA) and the Financial Planning Association® (FPA®) 21 % of your clients will likely experience a wealth transfer in the next decade

Source: Deloitte “10 Disruptive Trends in Wealth Management” 2015 90 % of heirs change advisors when there is a wealth transfer

Established clients Acquainted and involved Are Your Relationships Deep Enough? Source: The Cerulli Report – U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2016 Have been introduced, but with limited interactions Unacquainted Spouse Children Grandchildren 60% 7% 2%

Identifying Your Assets at Risk How many of my “top” clients are in their 70s? What is the total assets under management of these clients? Of those top clients, how many times in the past 12 months have I had an engagement with the spouse or children? 3 Questions to Sharpen Your Focus

How family dynamics impact your relationship with clients

Today’s Affluent Families are Increasingly “Modern” 2018’s affluent families are as likely to be modern families, which means they might be blended families, families with a single parent as the head of the household, or some other non-traditional family structure. Sources: America’s Families and Living Arrangements, 2013. United States Census Bureau, 2013, UBS Investor Watch survey of affluent (at least $1 million in investable assets) and high net worth (at least $5 million in investable assets) investors, 2015. Modern 34% No Children 31% Traditional 35%

Enduring Conflicts Impact Family Dynamics We conducted proprietary research and commissioned focus groups to elicit feedback from advisors’ target audiences. Our focus groups revealed nuances in how different generations, genders and segments choose and work with a financial advisor. Baby Boomer Women Millennials Gen X LGBTQ Community High Net Worth

Spenders vs. Savers The vast majority of participants in the research self-identified as savers and their partners as spenders. IF ONLY MY HUSBAND WOULD STOP SAYING ‘WHY DID YOU BUY THAT?’

Security vs. Opportunity Family members often have significantly different investment styles and risk tolerances. One participant in the survey noted about her husband: WE HAVE SUCH OPPOSITE VIEWS— HE KEEPS HIS MONEY UNDER THE MATTRESS, AND I’M AN INVESTOR.”

A Reluctance To Talk About Money Most parents have some reluctance to discuss financial matters with their kids. Source: T. Rowe Price Parents & Kids Money Survey, 2016 BOTH MY MOTHER’S AND FATHER’S SIDE NEVER TALKED ABOUT MONEY” Are in some way reluctant 71% Are not reluctant 29%

Charting Family Dynamics Advisors can begin to better understand the overall family dynamics by charting a few simple data points about each family member: Are they a “saver” or a “spender”? What is their tolerance for risk? Are they “open” or “closed” when it comes to talking about money? Chart the answers on scales of one to ten. Here’s an example: Saver [1] Spender [10] Security [1] Closed [1] Opportunity [10] Open [10] D N A   Daniel (primary client) Nora (spouse) Anna (child) A N N A D D Money Habits Risk Tolerance Communication Style

Cultivating Relationships beyond the Primary Client

Increase Loyalty by Extending Relationships Developing ongoing engagement with spouses, children and grandchildren can increase client loyalty before the wealth transfer occurs. Focus on the individual needs of each family member—which will be different than the primary decision maker. Be mindful of philosophical differences between family members (e.g. different risk tolerances). Do not weigh one opinion over another.

Meet Each Family Members Unique Needs Document the entire family and relevant profile in your CRM systems so you can be proactive in identifying and responding to family needs. Graduation MarriageNew child or grandchild Milestone birthday of client or client’s relative A new job Purchase of a home

Connect First, Then Have the “Money Talk” Many participants shared the issues they faced when they did not have the “money talk” with their families. When [my mother] passed, we found so many accounts in so many places there was no open communication— I never want to live through that again.” We all sat down, had a meeting, went over my parents’ will and accounts. It felt good to know, and gives you a sense of peace.” Our research shows that participants who had already had the money talk with their family felt more at ease with the thought of a wealth transfer. In fact, their experiences were universally positive :

Connecting across generations and audiences

Each Family Member Has Unique Financial Needs and Values Our focus groups revealed nuances in how different generations, genders and segments choose and work with a financial advisor. These insights can help drive conversations around wealth transfer and further develop relationships. For Institutional Investor Use Only Baby Boomer Women Millennials Gen X LGBTQ Community High Net Worth

Connecting with Baby Boomer Women Common financial needs Same needs as primary decision maker, but often expressed more conservative investing style, worry about losing moneyOften manage finances separately from their partners Highly motivated to help their children be successful Value security and trust much more than their male counterpartsWays to communicateFar more wary of advisors’ motivations and hidden fee structures Consider engaging this group about the needs of their children/grandchildren as a key connection point

Connecting with Millennials Common financial needs 47% of Millennials are parents 1When/How to purchase real estatePaying down student loan debtSurprisingly conservative Ways to communicateData-driven, would like to compare financial performance metrics Many expect or prefer interactions to be remote and augmented with technology, i.e. video chats or slide show presentations 1. Corporate Executive Board Iconoculture Values & Lifestyle survey, October 2016

Connecting with Gen X Common financial needs Saving for their kids’ college tuitions Financially stressed about retirement goals Supporting their parents (understand elder care options, etc.)Ways to communicateThis was the most time-strapped group, so keep things brief Skeptical—This group deeply understands that forces beyond one’s control can swoop in and change everything Email and phone calls are utilized, but you may need to be both persistent and understanding of their limited ability to connect

Connecting with the LGBTQ Community Common financial needs More conscious about the need for, and nuances of, estate planning They feel underserved by the asset management industry Ways to communicateSelf reliant when it comes to finances, but open and receptive to guidance Important that an advisor’s company is know to be supportive of LGBTQ community, less important that the advisor is part of the LGBTQ community

Connecting with HNW Clients Common financial needs Tax avoidance Preserving their accumulated wealthEnsuring their legacyWays to communicateInterested in their advisor’s own success,More likely to be interested in carrying their financial advisor relationship forward with their adult children, and exploring the potential for the advisor to play a role in increasing the financial literacy of their children

Preparing for the great wealth transfer

Increase Loyalty by Extending Relationships Use our advisor tool to create your action plan Identify key clients at risk and create engagement targets Chart the family dynamics to better understand how to connect Learn more about each family member to identify opportunities to engage Go to www.troweprice.com/familydynamics for more resources.

Important Information This material is provided for general and educational purposes only, and is not intended to provide legal, tax or investment advice. It does not provide fiduciary recommendations concerning investments or investment management. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price. The views contained herein are as of the date of this presentation and are subject to change without notice; these views may differ from those of other T. Rowe Price associates. All investments are subject to risk, including the possible loss of principal. T. Rowe Price Investment Services, Inc. T. ROWE PRICE, INVEST WITH CONFIDENCE and the bighorn sheep design are collectively and/or apart, trademarks of T. Rowe Price Group, Inc. © 2018 T. Rowe Price. All rights reserved.

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