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Advisors: 7 Tips to Make Your Practice Multigenerational

Cornelius Vanderbilt was one of the world’s richest men when he died in 1877, leaving a $100 million fortune to his heirs. In just four generations, the Vanderbilt descendants squandered the fortune with reckless spending and declining investments. When 120 Vanderbilt heirs gathered at a 1973 family reunion, not a single one was a millionaire. One direct descendant had died penniless. 

The legacy of “the Commodore” imparts an important lesson for financial advisors. Unless there is a solid plan for generational wealth transfer, most beneficiaries will ultimately spend through it. Sadly, 70% of wealthy families lose their wealth by the second generation, according to the Williams Group wealth consultancy. Worse, about 90% of families lose wealth by the third generation.

What many financial advisors have failed to realize is that the same statistics can hold true in their own practices. The wealth that they build for their clients is just as easily lost by failing to build a multigenerational firm. The value of an advisory firm can drop dramatically when key clients die and their heirs are not also clients of the firm.

Here are seven tips for ensuring the transfer of wealth happens with your financial advisory firm from one generation to the next:

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