Why are Financial Advisers worried about intergenerational wealth transfer?

Intergenerational wealth transfers, either in the form of inheritance after death or via gift transfers, are continually increasing. 

The main factors that can be attributed to this rise are:

1. Increasing wealth: the generation known as ‘baby boomers’ have amassed large sums of wealth, as they have largely benefitted from inflation in property prices and stock markets.
2. An ageing population: life expectancy in the UK has significantly risen, meaning that people are able to hold onto their assets for longer. In 2020, the Office of National Statistics reported that males aged 65 in the UK could expect to live a further 19.7 years, and females could expect to live a further 22 years.

Financial Advisers dealing with intergenerational wealth transfers may come across obstacles and risks, especially as wealth continues to rise. To put things into perspective, HM Revenue & Customs data shows that Inheritance Tax receipts for April 2022 to January 2023 stood at £5.9 billion, an increase of 15% on the same period the previous year.

£5.5 trillion is expected to pass between generations in the UK from 2017 to 2047. Statistics from our research paper, Passing on the Pounds, show that close to £1 trillion of intergenerational transfers are set to take place between 2017 and 2027.

Watch the video below for a summary of our research:

What do Financial Advisers think of intergenerational wealth transfer?

Our 2017 research found that:

• 33% of Financial Advisers reported sums of over £1 million passing from deceased clients to their beneficiaries
• 66% of Financial Advisers considered their practice to be at risk of losing funds under management through intergenerational wealth transfers
  
  

Additionally, according to the 2022 Schroders UK Financial Adviser Survey:

• 59% of Financial Advisers were concerned that their business could lose assets as wealth transfers between generations
• Only 26% of Financial Advisers had a specific proposition for targeting intergenerational wealth transfers

This survey was completed by 439 Financial Advisers between October 18^th and November 8^th 2022.

This research shows that the majority of Financial Advisers continue to feel concerned that they may lose funds under management because of intergenerational wealth transfers. This is largely due to a significant amount of wealth being left unsupervised upon transfer. However, with 74% of Financial Advisers stating that they do not have a specific plan for targeting the transfer of family wealth to the next generation, many may be missing opportunities.

How can Financial Advisers manage the risk of intergenerational wealth transfer?

Schroder’s survey demonstrates that attracting younger clients is not a priority for most Financial Advisers. 68% reported an average client age of 51-64, a figure which has not changed much in recent years. This suggests a disconnect between Financial Advisers and the generation that will be inheriting their current clients’ wealth.

To further support this, the second instalment of our research, Wealth Transfer in the UK, discovered that over 25% of respondents cited a lack of relationship with the beneficiaries as the reason they were not retaining funds under management.

However, this loss of business can be avoided. For example, having open conversations with your current clients about the risks of leaving unmanaged wealth can help ensure their beneficiaries will seek financial advice upon inheritance. Schroder’s survey revealed that 86% of Financial Advisers did not have a marketing strategy in place for younger investors; by initiating these conversations early on, funds under management can be retained in the future, even if this may not be profitable immediately.

Intergenerational wealth transfer and estate administration

In addition, by introducing probate and estate administration services to your business offering, you can guarantee a smooth process from your client sadly passing away to establishing a relationship with their beneficiaries. You will be in a position to offer advice and expert services at the time of your client’s death, introducing your business to beneficiaries in return.

Kings Court Trust is an award-winning probate and estate administration provider. We can help you enhance your service proposition, giving you the opportunity to offer even more support to your clients or their families upon a death. In addition:

• You will have an additional revenue stream through our generous fee share on successful referrals
• We will refer beneficiaries back to you for financial advice, helping you bridge the gap, form relationships, and retain funds under management
• Our marketing materials, such as our blogs and guides, can help support you and your clients in understanding probate, estate administration, and what to do when someone dies

Read more about the benefits of working in partnership with Kings Court Trust.

Want to find out more about working in partnership with Kings Court Trust to offer your clients and their families award-winning probate and estate administration services? Get in touch today by calling 0333 207 5470 or filling in the form below: