Why you should care

Because if you’re inheriting big bucks, expect some friction laying hands on it.

Losing your parents is terrible enough. So it just adds insult to injury if your folks had some investments managed by an old-line firm that starts acting like a clingy ex the moment you want to see other financial managers. Maybe your broker doesn’t dedicate songs to you on the radio or threaten to hurt himself if you don’t give him a second chance. But often enough, forms mysteriously go missing, or you get repeated notices that you haven’t signed documents the right way, or the broker goes AWOL and won’t return calls or emails for weeks.

“They use stall tactics,” says Allan Roth, founder of the investment advisory firm Wealth Logic. “When a client comes to me, their old firm makes it difficult for them.”

Not that Wall Street has ever been famous for cuddly customer service. But there’s about to be a big reason to care. Make that 36 trillion reasons: That’s how many dollars baby boomers and Gen Xers are expected to pass along to their kids and grandkids over the next 50 years or so as part of what Boston College researchers call the largest transfer of wealth in U.S. history. (Yes, even given the market’s recent thrashing about; it’s a long-term projection that assumes markets will fluctuate.) As that money changes hands, the Merrill Lynches of the world have reason to worry: On average, half of the family assets these firms manage walk out the door when investments transfer between generations, consultants at PricewaterhouseCoopers found. Small wonder the firms are eager to fend off the inevitable any way they can.

When the Financial Industry Regulatory Authority recently established a hotline for elderly investors, heirs who couldn’t jilt their parents’ brokers were the most frequent callers. The securities watchdog, which is funded by the financial industry, acknowledges there’s a “trend” here, though it mostly just points people to a June “investor alert” that guides people through the process of moving their inherited stash to wherever they want to stash it. Brokerage firms and their industry association, the Financial Services Roundtable, generally declined to comment. One exception was Morgan Stanley, which informed OZY that “our policy is to promptly transfer assets to legally established beneficiaries.”

Brokerage firms do have reason to be cautious. Legal restrictions prevent them from sharing account information with anyone but designated beneficiaries or a few other specific people. And elder fraud — say, when the kids or caregivers connive to relieve mom or dad of their dough prematurely — is on the rise, says Shirley Whitenack, an elder-law attorney in New Jersey. Ripping off older folks is getting easier, she says, because fraudsters can gain access to online accounts instead of having to sweet-talk a broker face to face. On the other hand, delayed inheritances can also be a huge burden to adult children who were counting on the money to cover late-life medical expenses and other costs their parents incurred, says Christian Weller, a professor of public policy at the University of Massachusetts Boston.

Two big shifts are leading young’uns to ditch their family moneymen. After watching their parents’ net worth get whacked twice — first in the dot-com bust of 2001 and then in the Great Recession of 2008 — many millennials developed an allergy to high-risk, high-reward stock picking, also known as “active” investing. Instead, “passive” investing in big mutual funds and index funds that mimic, say, the Dow Jones industrial average, are in vogue, says Mike Piper, founder of the popular blog Oblivious Investor. “Young folks have bought into the idea that boring is good,” he says.

The same younger investors are also jumping to fee-only financial advisers in place of traditional brokers who work on commission. The latter, who typically get compensated with a percentage of every trade, often prefer the high turnover of active investing, putting them in conflict with more risk-averse investors. Millennials are also drawing financial advice from a variety of new sources ranging from social media and blogs to robo-advisers, which makes big brokerage firms much less authoritative when it comes to dictating mainstream investment practice.

Matthew Sheppard, a 27-year-old marketing manager in Oakland, California, manages a lot of his own funds instead of working with an adviser because, he says, “I didn’t just want to be at the whim of some guy getting a lot of his info from the same places I could be.” And since he has no real relationship with his parents’ financial adviser, he’s not likely to stick with the fellow when the time comes. “If I get an inheritance, I’ll probably take that and throw it into my own portfolio,” Sheppard says. “Unless I’ve failed miserably at solo investing.”

Some traditional firms are already moving to bridge the gap between baby boomer clients and their younger heirs. Some are simply hiring younger advisers. Others, such as Fidelity, are employing the services of consultants like the Institute for Preparing Heirs to learn the tech-savvy ways of the new generation. Those who fail to make their case to millennials “have a pretty profound risk of asset loss,” says Steve Crosby, a private-banking analyst for PricewaterhouseCoopers.

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