Why Inherited Business Owners Won’t Stay Loyal to Their Parents’ Bank
Imagine you’re the only child of a family business with a provenance in your community, and the plan all along has been for you to inherit and take on the legacy. You’re looking forward to running the show, having witnessed a generation or two of good track records. Can you then imagine that you might want to make operational changes, including moving the commercial bank or credit union relationship somewhere more… innovative?
That’s what’s happening with much of the generational wealth transfer. New business owners inherit not just a company but also the systems and vendors that come with it. And what made the company what it is may not be what a small and medium-sized business (SMB) owner trusts to profitably take it into the future. As banking has evolved, so have expectations for easily integrated, easily managed, transparent financial solutions.
The questions for financial institutions are (1) how will you retain the accounts, and (2) what can you do to win a new owner’s business? But first, let’s look into why the Great Wealth Transfer is a pressing issue for banks and credit unions focused on SMBs.
How is the great wealth transfer a factor in business banking?
First, the dollars. Overall, generational wealth expected to change hands through 2045 is estimated in the multi-trillions. If 99.9% of U.S. businesses are SMBs, they must represent a large portion of the expected inheritance, right? In fact, retiring Baby Boomer business owners currently represent about $10 trillion that will be sold off or inherited, as 70% of Boomers’ 12 million privately held businesses are expected to change hands over the next decade or so.
Complicating things is the fact that only about half (54%) of SMB owners have succession plans in place, while a majority (62%) of SMB owners have accelerated their retirement plans. So if you thought the Great Wealth Transfer as applied to businesses was theoretical, think again. We’ll see a lot of ownership transitions in the next few years, adding more impetus to financial institutions to prioritize strategic objectives when it comes to acquisition and retention of SMBs.
Why else is this important? In terms of acquisition, many banks and credit unions neglect to consider fee income that can be generated from small to mid-sized business accounts. And regarding retention, financial institutions risk losing not just one account but the lifetime value of the new owner’s business. Think treasury services, transferred wealth accounts, and future loans. In addition, winning one inherited business can create a network effect due to recommendations. That’s particularly true of younger generations, who rely heavily on social proof.
Why would a new SMB owner transfer their banking business?
Inherited business owners often feel a real or inferred pressure to modernize the relationships of the legacy company. Without a personal history with the existing financial institution, they can be disinclined to maintain loyalty. And certainly without the existing bank or credit union being in communication regarding the change of ownership, the new owners may not even have a sense of the importance of the relationship to the financial institution. Instead, new owners may not even give the legacy financial institution the opportunity, and they begin to evaluate the relationship against today’s operational needs, like digital-first banking, seamless payments, transparent pricing, and a wider set of products that reflect current realities of running a small or midsized enterprise.
In addition, cash flow management, access to credit, and financing modernization initiatives frequently surface as priorities. If a bank or credit union cannot provide competitive terms or innovative solutions, whether that’s real-time payment acceptance, expanded treasury services, or working capital for a post-transition investment, the successor will seek alternatives. A new business owner may assume a megabank-first mentality due to their size and reach, despite the probability that local and regional financial institutions have the offerings they need.
There is also a symbolic dimension. Many inheritors want to establish independence from their parents’ ways of doing business. A shift to a new financial institution is a statement of a fresh start. It’s also a bid to ensure unbiased guidance. Once one vendor is replaced, others typically follow. Cutting and creating new ties with accountants, attorneys, consultants, etc., further increases the risk of attrition for the legacy bank.
What can banks and credit unions do to retain or capture inherited SMB wealth?
Banks and credit unions that succeed will position themselves not as vendors, but as strategic partners in the succession journey. Here are 4 approaches to consider.
- Engage early in succession planning. If it’s not already on your 2026 strategic plan, add an outreach campaign to SMB owners that includes educational marketing, workshops, or advisory services to ensure your institution is part of the conversation before a transition happens.
- Expand digital and product offerings, such as Plinqit’s High Yield Savings for Business. SMB-focused affinity brands are a smart retention play, or loans specifically for tech-suite updates.
- Broaden your service offerings to include treasury management.
- Balance digital convenience with personal connection. While Millennials and Gen Z value frictionless banking, they also appreciate tailored advice and a sense that their unique circumstances are understood. A relationship-driven digital model can bridge both needs.
Financial institutions that treat the Great Wealth Transfer as a chance to deepen relationships, modernize offerings, and speak directly to the needs of SMBs – current owners and future inheritors – will capture not just accounts, but enduring partnerships.
