How advisors who prepare heirs can win the next generation

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Mike Richard often points to a cautionary tale when the topic of big inheritances comes up: the story of a lottery winner who ends up frittering away new-found wealth within a few years. The problem isn’t the money; it’s the lack of preparation.

Mr. Richard, national vice-president of segregated funds at Manulife, says that troubling pattern is playing out repeatedly across Canada.

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“Inheritance is creating more millionaires than lotteries ever have. But the same problem exists. How ready are those who receive the windfall – the spouses, children, or other heirs suddenly responsible for managing significant wealth?”

Recent research from the CFA Institute¹, looking at Canada and five other markets, found that 86% of Gen Z and millennial investors say they expect to receive an inheritance. That underscores how central this transition has become to the future of wealth management and financial advisory services.

“In Canada, an estimated $300-million is inherited every single day,” says Tom Deans, intergenerational wealth expert and author of The Happy Inheritor: How Successful Families Prepare Heirs and Transfer Wealth.

The stakes are high, elevating and changing the role of advisors, who are sitting at the centre of an unprecedented movement of money.

For decades, advisory practices were built around accumulation: growing assets, optimizing tax efficiency and preparing clients for retirement. That success has created a new challenge, Mr. Richard says: transferring that wealth efficiently and smoothly to the next generation. With larger portfolios comes added complexity. Estate delays, frozen assets, family disputes and liquidity constraints can all derail even the best-laid plans.

The solution begins with communication. Increasingly, advisors are facilitating structured family meetings that bring multiple generations into the planning process.

“The wealth advisor should own that meeting,” Mr. Deans says.

Advisors can co-ordinate input from accountants, lawyers and other professionals. Done well, family meetings create clarity around intentions, align expectations and give heirs the opportunity to ask questions before decisions become irreversible.

“It’s not a one-and-done,” Mr. Richard says. “These are meetings that happen regularly and over time.”

Beyond facilitating discussions, employing the right mix of tools can help advisors position themselves as the family’s long-term steward.

Among those tools are segregated (seg) funds, which are often used to help address both technical and behavioural challenges in estate planning.

Seg funds allow assets to avoid one’s estate and go straight to named beneficiaries because they’re insurance contracts.

“Payments go directly to the beneficiaries and avoid the delays and other challenges that come with the estate administration process,” Mr. Richard says.

That ready availability of cash is important. While traditional estate settlements can take months or even years, seg funds can provide liquidity within weeks. For executors, that can be transformative. It allows for immediate support for beneficiaries and, says Mr. Deans, “buys some time to administer the estate.”

The liquidity may also reduce the potential for conflict, such as when heirs challenge a will, or fight over how to fund taxes and expenses without forcing a sale of family assets. Mr. Deans says the cost of litigation for high-net-worth estates can be as much as $500,000 per litigant if the dispute goes to trial.

Beyond speedy payments to beneficiaries, seg funds offer flexibility. They can be structured to mirror certain trust-like features. In some cases, that can help advisors to tailor outcomes to specific family dynamics, all without the same level of cost or complexity associated with more formal trust structures.

Often, the real value of seg funds is most evident in practical scenarios. For example, advisors can structure death benefit payouts as income streams rather than lump sums, protecting beneficiaries who may not be ready to manage large inheritances. In other cases, wealth can be transferred while the client is alive, for example to help a child purchase a home, while maintaining a degree of control over how funds are used.

Professional advice and tools such as seg funds can strengthen estate planning, prepare beneficiaries and build multigenerational relationships that help futureproof an advisor’s practice.

In fact, CFA Institute research¹ shows younger investors aren’t just looking for portfolio construction. They want holistic financial guidance, including budgeting, education and long-term planning. Almost 90 per cent of survey participants say they either use or plan to use professional advice.

Preparing heirs is central to delivering the advice the next generation expects. For advisors, failing to engage them early can be costly.

“In many cases, there’s a real risk the inheritor will choose not to keep working with the advisor,” Mr. Richard says.

Yet, the potential upside is just as significant, Mr. Deans adds. Members of the next generation aren’t clients – at least not yet. But as wealth moves to them, advisors gain a powerful opportunity to build trust and turn inheritors into long‑term clients.

Advertising feature produced by Globe Content Studio with Manulife. The Globe’s editorial department was not involved.