How Community Banks Can Nurture Relationships With Next-Gen Customers

The “great wealth transfer” is top of mind for many in financial services, with trillions of dollars in personal wealth beginning to shift to younger Americans.

According to Cerulli Associates, an estimated $53 trillion in wealth will be transferred from baby boomers to their heirs over the next 20 years. Although Gen X and elder millennials are in line to inherit the biggest share of that wealth, a substantial amount of assets also will flow to younger millennials and Gen Z recipients. 

“The wealth transfer is definitely something that’s on our radar as clients get older, and we’re trying to make sure that we’re doing the right things to be there to help the next generation,” says Andy Basinger, managing director and head of Live Oak Private Wealth, a wholly owned $1.2 billion-asset subsidiary of $11.4 billion-asset Live Oak Bank in Wilmington, N.C.

Stopping wealth erosion

Americans don’t have a good track record when it comes to preserving inherited wealth. According to a 20‑year study by wealth consultancy The Williams Group, an estimated 70% of wealthy families lose their wealth by the second generation, and 90% lose their wealth by the third generation. 

“A lot of what we’re trying to do is stop that trend,” says Basinger. “We put a lot of emphasis on education with the clients and also educating the next generation and the kids who are going to inherit this money.” 

The downside risk to that wealth transfer is that it may erode a bank’s customer and deposit base, especially in cases where younger heirs have moved out of the area that the community bank serves. On the other hand, community banks can maintain and grow their business by building and strengthening relationships with the second and third generation. 

“I think this is a great opportunity … because the reason people deal with community banks is they like the one-on-one relationship,” says Leslie D. Crabill, executive vice president and director of wealth and investments at $843 million-asset Bank of Charles Town in Charles Town, W.Va. She adds that people know they can walk into a branch or pick up the phone if they have a question, versus going through an automated call center of a large bank to try to connect with someone.

Community banks that have a wealth management division have a more direct path to their senior clients to discuss topics like estate planning with named beneficiaries who can be brought into these meetings. 

Basinger says one important aspect to building bridges with next-generation customers is making sure the patriarch or matriarch of the family is comfortable with their advisor or banker talking with their family members about the wealth transfer. Some clients don’t necessarily want their advisor discussing specific dollar amounts. In this case, the focus should be more on educating the next generation about being good stewards of the wealth that they will receive, he notes.

“We would prefer to have a family meeting and get everybody around the table together, but we take the client’s lead to help us understand how they want to communicate this to the next generation,” says Basinger. “We do encourage them … to educate the next generation on the wealth transfer, because if they don’t, there ends up being confusion when that [head of the family] passes away.”

Sharing educational tools

Providing education and resources is a common theme to building strong relationships. In addition to hosting meetings with clients that include family members to discuss estate planning, Bank of Charles Town’s wealth division, BCT Wealth Advisors, offers seminars and webinars on topics such as Social Security, Medicare and Alzheimer’s/dementia. 

“We have found that taking the time to provide those seminars and webinars helps our clients in a way that builds trust,” says Crabill. “Then, when they come in the door, there is an opportunity to have a deeper conversation about their personal situation.” Those programs are promoted both to wealth clients and more broadly to retail and business customers in the bank through flyers, emails, phone calls and direct mail.

Banks that don’t have in-house wealth management can bring in outside experts, such as financial advisors, estate attorneys and CPAs for events. By sharing knowledge, the goal is that family members will see the value in keeping the banking relationship, says Emily Mays, vice president, chief administrative officer and marketing director at $200 million-asset Community Spirit Bank in Red Bay, Ala. 

“You’re always hoping these efforts tie back to your branding and engagement and people who are coming back to the bank because they see the value in what you’re offering,” she adds.

Live Oak Private Wealth recently included an article on the great wealth transfer in its quarterly newsletter. People are not always ready to talk about estate planning, notes Basinger, and those types of efforts help to start conversations with clients. 

In addition, younger generations are more comfortable with digital communication—emails, texting, video calls and social media. “So, it’s important that our tech stack evolves over time so we can meet those clients where they want to be communicated with,” says Basinger. “We also are trying to make sure we have advisors of all different ages and backgrounds to bring the type of technology to communicate with clients where they want to be.”