Intergenerational wealth loss threatens half of advice firms

14 May 2022

Nearly half (46%) of advisers do not feel confident they would retain assets under advice when wealth is transferred to clients’ family members, and the majority are unsure how to tackle the issue, new research* from Octopus Investments has shown.

According to the findings, 59% do not have a strategy in place to address the potential loss of assets, despite 67% of those inheriting a significant sum of money stating they would seek financial advice and 75% open to using the same adviser.

The research also found a discord between how advisers expect inherited wealth to be used and how beneficiaries would put the money to use. More than half (52%) of advisers believe the priority would be paying off their mortgage or other debt, however only 15% of beneficiaries said this would be their focus.

Ruth Handcock, CEO of Octopus Investments, said: “These findings point to a pretty wide gulf of opinion between the financial advice industry and those inheriting wealth. The new beneficiaries of wealth are clearly really positive about the role for financial advice as they inherit in the years ahead.

“Advisers should take this as a boost of confidence and a signal that there are ripe opportunities to build meaningful relationships with wealth beneficiaries. However, without proactive strategies in place to do so, those chances could be in jeopardy.”

Of those that do intergenerational work, 96% say they invest time in meeting the children and grandchildren and building relationships with the clients’ family, while one in 10 (11%) provide educational resources to family members and 7% invest in digital solutions.

According to Octopus, advisers should start building relationships with beneficiaries earlier to help them understand the planning put in place, make intergenerational planning integral to the firm’s process, asking clients questions about children and their wider family as part of the fact find and understand what beneficiaries want and need from financial advice.

In addition, Octopus recommends firms diversify their talent pool to ensure advisers reflect future beneficiaries.

Women more likely to change adviser

Octopus believes diversity within a firm will help to capture more female wealth, with women disproportionately opting to use a different adviser (42%) to their family, compared to men (13%).

Despite this, only 5% of advisers have a dedicated strategy for advising and retaining women.

Handcock added: “Trillions of assets are expected to be passed to women in the coming decade, placing unprecedented levels of wealth in women’s hands. I do believe advisers should have personalised strategies for women. Trust and connection are powerful feelings when it comes to emotive topics like money and wealth. People are far more likely to engage with financial advice when they feel they’re being advised by someone who truly understands their hopes, dreams and fears. By having a diverse pool of advisers, firms will ensure female clients can find someone that reflects who they are.

“Beyond prioritising diversity, I have seen some great strategies implemented by forward-thinking financial advisers, including spousal strategies, where advisers ensure there is a relationship with both members of a couple, and tailoring events specifically to things they think women will appreciate and enjoy. That could be demystifying investing through education-focused sessions or providing networking moments so clients can meet other like minded women in a social setting.”

* Octopus Investments conducted research amongst 506 financially advised clients, 201 IFAs, and 1,004 wealth recipients

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Professional Paraplanner