The majority of paraplanners believe having an effective intergenerational planning strategy is now extremely important for most financial planning firms going forward, yet few firms seem to be actively employing a strategy to attract the next generation of their clients’ families.
Every paraplanner responding to Professional Paraplanner’s recent Parameters survey, recognised the need for intergenerational planning, with 77% of paraplanners identifying it as ‘very important’ for their firms, while the remaining 23% said it was ‘important’.
“We are all aware of the ‘baby-boomer’ intergenerational wealth transfer that will take place over the next few decades, so intergenerational planning is going to be vital to retain funds under management and clients on our books,” as one paraplanner said.
This kind of planning strategy has taken on greater significance, it was pointed out, following recent changes announced to taxation, such as pensions now forming part of the estate for IHT purposes.
“Intergenerational planning is far more important now than it ever has been. The complexity of assets upon death makes it harder for people to understand how best to prepare their estates for the future.
“As wealth is passed down through generations, it’s essential to engage with younger family members to ensure that they understand and manage their inherited wealth effectively,” one paraplanner commented.
Others highlighted the importance going forward for firms to maximise referrals to families of existing clients over seeking new business leads, as, despite advice firms noting an uptick in new leads in the past couple of years, over time the latter may become harder to come by.
“Bringing younger clients into the client bank is needed for survival, so retaining control of existing assets is the easiest, most cost effective method of doing this,” one paraplanner pointed out.
With data showing that children and grandchildren are highly likely to change their adviser or not use one at all, on inheriting funds, engaging with them early will help to ensure they remain as clients.
“With the growing emphasis on long-term financial security and the evolving needs of younger generations – who may have different financial goals and attitudes toward money – it’s increasingly important for firms to have a strategy in place,” one paraplanner said. “This will help maintain client relationships across generations and create a smoother transition of wealth, while also ensuring that the next generation is financially educated and prepared.”
What are strategies in place?
Despite 100% of respondents recognising the need for an intergenerational wealth planning strategy, asked if their firms had a strategy for engaging with the next generation of clients’ families, only 53% said yes, 27% said No, while 20% were unsure.
Among those that said they had a strategy, the approach taken by many firms appears to be ad hoc and down to the adviser, rather than having a defined strategy within the firm.
A number of paraplanners commented that their firms engaged with the younger generations “naturally”, rather than having a dedicated strategy – “not a specific strategy, but we always try to get the children involved when suitable and necessary.”
Others said it was undertaken during client reviews: “This is done on an individual basis, usually as part of the ongoing review process, upon identifying opportunities for investing or passing the wealth to next generation. Most often this is in the context of setting up Junior ISAs, children growing up, or mitigating IHT for older clients”
Others said they relied on referrals to children, or only engaged with the children when their clients started to reach later life.
Among those taking more direct action to attract the next generation among their clients, paraplanners said that as part of their firms’ estate planning the adult children were invited along to the client meetings “so that they understand the financial planning that has taken place and the motives behind it.
“We are also happy to help arrange mortgages for children of existing clients, and in turn the protection to go with that, as this also builds the relationship at a younger age,” one respondent said.
And it was clear that some firms have introduced dedicated services to address this target market: “We have recently launched our Family Wealth service specifically to cater to this market.”
“We have a Governance and Succession team who work with families, as well as a next generation annual workshop for the children of clients. We engage early with children and regularly provide financial education sessions,” another said.
Others said their forms have introduced reduced fees on estate planning for family members to help bring on board future generations.
Opportunity being missed by firms
Asked if they felt their firm was missing an opportunity by not having defined strategic plan to attract intergenerational wealth, 59% thought their firms were, 18% thought not and 23% were unsure.
“This is definitely a missed opportunity both for clients’ own objectives as well as our firm’s long term business plan,” said one.
“This is a massive opportunity because they will inherit the wealth!” said another.
“While a third said: “Engaging with clients’ children will allow for a more holistic approach to investing. It will allow estates to be handled with greater ease and efficiency as well as continuing service of the family and its needs.”
Career paraplanners, who tend to be a younger demographic than the majority of advisers, may want to raise this issue with their business owners, to ensure future revenue streams.
