Intergenerational wealth transfer – Opportunity or challenge?

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Research shows that over the next decade £1 trillion of assets will flow to future generations[1] and that 80% of financial advisers believe that this is a significant business opportunity. However only 9% are facilitating family conversations to help manage this transfer[2]

Evidence also indicates that the generation inheriting wealth have a different attitude towards advice than their parents and prefer to pay for this only when they have a requirement. They are also highly unlikely to use the same financial advisers as the people who are passing on wealth to them.

Given this backdrop, are financial advisers well positioned to maximise this opportunity? Here are three considerations: 

1. Audit the opportunity:

Many advisers have clients who wish to pass on some of their wealth but have not analysed how much of that wealth is likely to remain within their management. A recent survey indicated that 15% of firms had lost up to 50% of their value due to lack of a strategy for intergenerational wealth transfer. Advisers may therefore want to review the assets under management and fee income of clients over a certain age and then assess the current level of family engagement. If low then action might be required.

2. Develop a new proposition:

Engaging with the next generation is not simply about recruiting a millennial to engage with them. One option is to define a new client segment and develop an appropriate service proposition. This may include mortgage and protection advice, school fees planning and simple savings options. The charging structure might need to be reviewed – should services be offered on a fixed fee rather than ad valorum basis? 

Engagement through technology could also be considered as should the investment proposition. Whilst wealthy clients might need their IHT carefully managed through a bespoke mandate and for those inheriting wealth but starting to save a multi-asset fund or platform based model portfolio solution could be appropriate.

Currently 38% of those likely to inherit wealth will put this into a savings account so helping clients with early investment education is a good start. 

3. Consider your business valuation:     

Over the next few years, many advisers are considering an exit strategy for their business. However, if transferred wealth ‘walks away’ from the business, this could impact a valuation based on a multiple of income.

In short, intergenerational transfer of wealth can deliver a range of opportunities but planning for this is required!

 Gillian Hepburn, 

Intermediary Solutions Director, Schroders



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[1] CEBR and Kings Court Trust, 2017

[2] The Generation Game, Sanlam report, 2018

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