Cornerstone Boosts Retention 15% With Generational Wealth Workshops

Cornerstone Boosts Retention 15% With Generational Wealth Workshops

Executive Summary

Cornerstone Advisory Group faced a significant challenge: client assets slowly eroding upon generational transfer due to a lack of proactive wealth transfer planning. To address this, Cornerstone implemented a series of targeted workshops designed to educate clients and their families on estate planning and wealth transfer strategies. This proactive approach resulted in a 15% increase in client retention within one year, translating to $4.8 million in additional assets under management (AUM) retained.

The Challenge

Cornerstone Advisory Group, a well-established RIA managing over $320 million in AUM, recognized a growing trend that threatened their long-term growth: the gradual outflow of assets following the death or retirement of their founding clients. While overall AUM continued to climb due to new client acquisition and market performance, Michael O’Brien, Cornerstone’s managing partner, noticed a disconcerting pattern.

“We were diligently acquiring new clients,” O’Brien explains, “but we were also seeing a consistent, albeit subtle, decline in AUM within our older client base following a generational transfer. Often, the beneficiaries, while appreciative of the legacy, didn’t fully understand our investment philosophy or lacked an established relationship with our firm.”

Specifically, Cornerstone’s data revealed that approximately 8% of AUM belonging to clients over the age of 70 was lost annually to attrition following a transfer of wealth to the next generation. In a year, this equated to roughly $2.56 million leaving the firm – a significant figure that, if left unchecked, would severely impact future growth projections.

Further analysis indicated that this attrition wasn't necessarily due to dissatisfaction with Cornerstone's performance. Instead, it stemmed from a lack of pre-existing relationships between Cornerstone and the beneficiaries, coupled with a general lack of understanding about the complexities of estate planning and wealth management. Many clients, while financially successful, hadn't proactively engaged in conversations about their estate plans with their families, leaving the younger generation ill-prepared to manage the inherited wealth. For example, one client, Mrs. Evelyn Thompson (82), passed away leaving a $1.2 million portfolio to her two children. While both children respected their mother's legacy, neither had been actively involved in financial planning and ultimately decided to move a portion of the assets to a different institution, citing a desire for a "fresh start" and a lack of familiarity with Cornerstone. This lack of familiarity was costing Cornerstone significant revenue.

Cornerstone realized that they needed to shift from a reactive posture (addressing client attrition after a wealth transfer) to a proactive strategy that fostered intergenerational communication, educated beneficiaries, and strengthened client relationships across the family. The key question became: how could they proactively engage the next generation and demonstrate the value of Cornerstone’s services beyond the original client?

The Approach

Cornerstone developed a multi-pronged approach centered around a series of “Generational Wealth Transfer Workshops.” These workshops were designed to:

1. Educate: Provide clients and their families with a comprehensive overview of estate planning strategies, including wills, trusts, power of attorney, and gifting strategies. They also covered key investment concepts, risk management, and tax implications of wealth transfer.

2. Facilitate Dialogue: Create a safe and supportive environment for families to openly discuss their financial goals, values, and concerns. Structured activities and guided discussions were incorporated to encourage meaningful conversations.

3. Build Relationships: Introduce the next generation to Cornerstone’s team and investment philosophy. The workshops provided an opportunity for beneficiaries to meet the advisors, understand the firm’s approach, and establish a personal connection.

4. Offer Personalized Guidance: Following the workshops, Cornerstone offered personalized consultations to help families develop customized wealth transfer plans tailored to their specific circumstances.

The strategic decision framework involved several key considerations:

• Target Audience: The workshops were specifically targeted towards clients over the age of 65 with investable assets exceeding $500,000. These clients were identified as being at the highest risk of experiencing a generational wealth transfer in the near future.
• Workshop Format: The workshops were designed to be interactive and engaging, incorporating presentations, case studies, Q&A sessions, and small group discussions. A maximum of 10 families were included in each workshop to ensure personalized attention.
• Curriculum Development: The curriculum was developed in collaboration with estate planning attorneys and tax advisors to ensure accuracy and relevance. It covered topics such as estate tax planning, charitable giving, business succession planning, and financial planning for the next generation.
• Marketing and Promotion: The workshops were promoted through a targeted email marketing campaign, client portal announcements, and personal invitations from Cornerstone advisors.
• Follow-Up: After each workshop, participants received a comprehensive workbook summarizing the key concepts discussed, along with a personalized invitation to schedule a follow-up consultation to discuss their specific wealth transfer planning needs.

Cornerstone recognized that a one-size-fits-all approach wouldn't be effective. Each family’s situation was unique, requiring a tailored strategy that aligned with their specific goals and values. The workshops served as a catalyst for these personalized conversations, ultimately leading to more comprehensive and effective wealth transfer plans.

Technical Implementation

The technical implementation of the Generational Wealth Transfer Workshops involved several key tools and processes:

• Email Marketing (Mailchimp): Mailchimp was used to create and distribute targeted email campaigns promoting the workshops to eligible clients. Segmentation was based on age, AUM, and previous engagement with Cornerstone’s educational materials. Email campaigns included personalized invitations, workshop agendas, and registration links.
• Client Portal (Proprietary): Cornerstone’s proprietary client portal was used to announce the workshops and provide access to registration materials. The portal also served as a central hub for communication and document sharing.
• CRM (Salesforce): Salesforce was used to track client engagement, workshop attendance, and follow-up activities. This allowed Cornerstone to monitor the effectiveness of the program and identify opportunities for improvement.
• Workshop Materials (Developed Internally): Cornerstone developed a comprehensive workbook that included detailed information on estate planning strategies, tax implications, and investment concepts. The workbook also included worksheets and checklists to help families organize their financial information and develop a personalized wealth transfer plan. The creation of the workbook involved a one-time cost of $3,000.
• Financial Modeling: Cornerstone advisors utilized financial modeling software (e.g., Monte Carlo simulations) to illustrate the potential impact of different wealth transfer strategies on clients' long-term financial security. These models helped families understand the trade-offs involved and make informed decisions. For example, scenarios comparing the tax benefits of different types of trusts were presented.
• AUM Calculation Methodology: Retention was specifically calculated for the "targeted group" described in the previous section (clients over 65 with $500k+ in assets). The starting AUM for this group was $32 million. The annual attrition rate (before the workshop program) was 8%, representing $2.56M. Post-workshop, the new attrition rate was calculated by comparing the AUM at the beginning and end of the year, accounting for new investments and market fluctuations. The 15% retention increase was directly tied to a decrease in AUM attrition.

Results & ROI

The Generational Wealth Transfer Workshops yielded significant positive results for Cornerstone Advisory Group:

• Client Retention Increase: Client retention within the targeted group (clients over 65 with $500k+ in assets) increased by 15% within one year.
• AUM Retained: This 15% increase in retention translated to an additional $4.8 million in AUM retained (15% of $32M). This was calculated by comparing the projected attrition (based on the previous 8% rate) with the actual attrition observed after implementing the workshops.
• New Business Opportunities: The workshops also generated new business opportunities, as several beneficiaries who attended the workshops decided to consolidate their assets with Cornerstone. This resulted in an additional $1.2 million in new AUM.
• Improved Client Relationships: The workshops fostered stronger relationships between Cornerstone advisors and clients' families. This increased client loyalty and reduced the likelihood of future attrition.
• Increased Client Engagement: Clients who attended the workshops became more engaged with Cornerstone's services, participating more actively in investment reviews and financial planning discussions.
• Direct Revenue Impact: The retained AUM of $4.8 million generated an estimated $38,400 in annual revenue, assuming a standard advisory fee of 0.8%.
• Return on Investment: Considering the initial investment in curriculum development ($3,000), marketing expenses ($2,000), and advisor time (estimated at $5,000), the ROI of the Generational Wealth Transfer Workshops was significant. The $38,400 in new revenue far outweighed the initial investment of $10,000. This resulted in a ROI of over 380% in the first year.

Before the workshops, Cornerstone projected losing $2.56M in AUM from generational transfers within the targeted group. After implementing the workshops, the actual loss was significantly lower, demonstrating the effectiveness of the proactive approach.

Key Takeaways

Here are some actionable insights for other advisors considering implementing similar strategies:

1. Proactive Engagement is Key: Don't wait for a wealth transfer to occur before engaging with the next generation. Start building relationships early and educate beneficiaries on the benefits of working with your firm.
2. Family Communication is Crucial: Facilitate open and honest communication between family members about their financial goals and values. This will help ensure a smooth and successful wealth transfer.
3. Personalization is Essential: Tailor your advice to each family's specific circumstances and needs. A one-size-fits-all approach is unlikely to be effective.
4. Data Tracking Matters: Monitor the effectiveness of your programs and make adjustments as needed. Use data to identify trends and measure the impact of your efforts.
5. Invest in Education: Continuous learning and professional development are essential for staying up-to-date on the latest estate planning strategies and tax laws. This knowledge enables you to provide valuable guidance to your clients and their families.

About Golden Door Asset

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