For professional advisers and paraplanners only. Not to be relied upon by retail clients.
The transfer of wealth to surviving female spouses and younger generations is either going to impact your advice business or already is impacting it. Read on to learn what other advice firms have learnt from their experiences so far.
About 30 years ago, the sudden and unexpected death of a client sprung Alan Marks – at the time a financial adviser – into action.
It was an important client and Alan worked overtime to get everything in order for the client’s loved ones, including valuable life policies and death in service benefit.
Alan had two things on his mind: to fulfil his duty to the client, and to advise his client’s beneficiaries, who had inherited a significant sum overnight.
Only, things didn’t go quite to plan.
Involving the family early
“I’ll never forget it. I worked closely with the family, and I worked really hard,” says Alan Marks. “But another adviser got in and did a sales pitch on the widow and children. I missed out and I’d done a really great job.”
This was an eye-opener.
“It taught me a valuable lesson. It was too late by the time I was engaging with the beneficiaries.”
“If you haven’t already built a relationship when the time comes, they won’t care about what you’ve done for the client.”
This was a shaping experience in Alan’s career in the advice industry. Nowadays, he is Managing Director at Harrison Spence, buying and selling advice practices. Intergenerational planning is now high on his agenda when advice firms turn up looking to buy or sell a book.
“The question we ask is, ‘Are you doing later life planning with all your clients?’ If I get, ‘What do you mean by that?’ I know they’re not. And if I get, ‘Yes of course, we do trusts, wills, and we meet with the children and the grandchildren, and we talk about moving assets down’, that’s when I know we’ve got a client selling a business with top value.”
The value of intergenerational planning
“An ageing client bank devalues a business,” explains Alan. “It’s just a fact, because whoever is buying the book hasn’t got as long to earn from it. That is, unless they can introduce something you haven’t done – and that something is intergenerational advice.”
“If someone looks at a book and sees ageing clients, they’ll start thinking they might lose 15% of those people.”
“Good practice is to do the intergenerational work. Meet the kids, meet the grandchildren, and build a relationship with your client’s family.”
“If you want to sell something, you get one chance to make a first impression. You could lose 15% to 20% of real value by not preparing and not spending the time. Intergenerational planning is a critical part of that long term preparation.”
Engaging the beneficiaries
Sunny Sonpal of Collective Financial Planning is one adviser who’s started to focus more on engaging with the next generation.
“The pandemic gave us time to reflect on what was going on. We lost four clients to Covid and at the same time, some of our older clients have begun to pass away naturally.”
“We had one client who passed away and his daughter, who had never engaged with me before, just took everything away.”
“I thought, hang on a second, this is a new generation coming through and I don’t think they are fully engaged in financial services or fully understand it. Do we want to lose all the hard work we’ve done to another adviser or institution?”
“I told myself I’ve got to get working with the beneficiaries a lot earlier.”
Estate planning is a great way to do this.
“What I’m finding is that when I get engaged with the beneficiaries, they’re paying a lot of attention. When they actually know what the wealth is they could inherit, they go away and do their research. Because they’re a younger generation, they will Google what I’m saying and come back and agree with what I’m saying. I know they’ve Googled it, because they’ve had no clue before and now it’s a very detailed email response. That’s fine, because the more questions they ask me, the more engaged they are.”
Adapting to younger generations
It goes without saying that younger generations have different needs, attitudes, and wants than their parents.
Dr Eliza Filby is a leading generations expert and she believes there are some key considerations advisers can keep in mind to have the best chance of retaining assets when wealth passes down the generations.
“Advisers should think about their current offering to younger clients in terms of three things,” says Eliza.
“The first, does your service and advice feel bespoke? You have a generation of younger clients who are expect customised experiences. Are you bespoke in your communications, in the delivery, in the wording, in the documents?”
“The second thing is to ensure your advice is gender neutral. We really need to banish from our minds the ideas and stereotypes around what a female life path looks like and a male life path.”
“And the third thing is to be educationally focused. What stands out from surveys of younger people is their insecurity about their financial knowledge. Are you upskilling them? Are you teaching them? And if so, how are you doing that?”
Family conversations
Eliza is passionate about how understanding generational differences can lead to better business outcomes.
“You may think what’s this generational analysis got to do with me and my advice business?” says Eliza. “Well, you’re getting much more equality within marriages. Women are making much more of the big financial decisions. And children are having a much greater say in their parents’ financial decisions.”
Perhaps these social and economic changes are already impacting advisers. Research from Schroders found that 70% of women inheriting wealth change advisers within a year of their partner’s death.[1]
This is something we put to Kirsty Coldicott of KLC Financial, another financial adviser where intergenerational planning is integral to their process.
“I’ve not come across that issue yet,” says Kirsty. “But I can understand why that might be the case. Because if the husband has dealt with another financial adviser and the finances have been very much dealt with by the male, then maybe they just don’t have any relationship with the spouse or the children.”
“It’s interesting. I have had wealthy widows come to me for advice, but I didn’t interrogate why they didn’t stick with their original financial planner.”
“Almost never would I deal with one spouse rather than both. We’re not this faceless entity that just deals with the husband, where the widow and children have no idea who to engage with.”
“We’re not losing client assets because we’re engaging with the families regularly. That protects us.”
How to prepare for the new beneficiaries of wealth
If you’re an adviser, the simple fact is that the transfer of wealth to surviving female spouses and younger generations is either going to impact your business or already is impacting it.
To prepare, join Octopus for a webinar on Thursday 12 May at 11am. You’ll hear more from Alan, Sunny, Kirsty and special guest Dr Eliza Filby. We’ll also explain how we can support intergenerational planning in your business.
Register at octopusinvestments.com/wealthtransferwebinar/
Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: April 2022. CAM011954
[1] https://www.schroders.com/en/media-relations/newsroom/all_news_releases/schroders-financial-adviser-survey-only-7-of-financial-advisers-have-a-proposition-for-advising-and-retaining-women/
