Financial advisers in the UK need to make more of an effort to build and maintain rapport with their clients who are set to inherit significant sums of money, as research suggests many are unhappy with the service they are currently receiving.
Around 36,000 high net worth individuals in the UK are expected to transfer £127bn ($158bn, €144bn) to 283,000 inheritors in the next decade, according to Brooks Macdonald.
This is an average of £500,000 per inheritor.
In the same period, 770 ultra-high net worth individuals will pass down £200bn to 6,000 UK beneficiaries, who will receive an average of £34m.
The breakdown by asset type is:
- 52% property;
- 29% cash;
- 22% investments; and
- 10% valuables
Survey
The research coincided with a Brooks Macdonald survey of 250 UK recent beneficiaries and prospective inheritors who already have average investable assets of £1.5m.
It also polled 221 intermediaries in the UK, who look after clients with an average wealth of £770,000.
It found that 89% of inheritors use an adviser, however 40% of these are not satisfied with their IFA.
Only 47% are likely to use their benefactors’ adviser, while 22% are unlikely to do this.
The majority of advisers (89%) said they speak to a client’s spouse/partner, but this fell for their children (54%), extended family members (10%) and grandchildren (5%).
Robin Eggar, managing director and co-head of UK investment management at Brooks Macdonald, said: “Intergenerational wealth transfer presents a growing threat to UK adviser firms, amid shifting consumer behaviour and the advent of new technologies.
“However, firms that are prepared to meet the challenges it presents will be able to strengthen their existing client relationships and grow their businesses.”
Conversations
Brooks Macdonald’s survey also found that 62% of inheritors have discussed their inheritance with an adviser.
A third (34%) said they do not speak to an IFA because they do not use them, while 20% said they do not speak to an IFA because they have no inheritance plans.
The main reason for a conversation with an IFA according to inheritors was property purchases (38%), this was closely followed by recent inheritance (34%) and family event (33%) eg weddings.
Just under three-in-10 (28%) said retirement, as 21% said conversations were triggered by the sale of a business.
The study also found clients are not utilising the offering from advisers.
| Service offered | % offered by advisers | % used by clients |
| Inheritance tax planning | 93% | 59% |
| Wills | 84% | 54% |
| Gift strategy | 82% | 36% |
| Trusts | 80% | 23% |
| Power of Attorney | 70% | 17% |
Vulgar
Gary Sunderland, head of research and indices at the Personal Investment Management & Financial Advice Association (Pimfa), said: “The increasing rate of intergenerational wealth transfer poses significant challenges to families and their professional advisers.
“Without frank honesty, open discussion and adequate preparation, families can expose themselves to excessive taxation and awkward unforeseen probate processes.
“The British trait of avoiding ‘vulgar’ financial conversations is being resigned to the past and advisers can now help families prepare for the future by holding open discussions about wealth transfer.”
Characteristics
The report also showed that IFAs and inheritors differ on the important characteristics clients want for their adviser.
Most advisers (89%) said rapport was the top characteristic, followed by personal/professional recommendations (84%) and adviser reputation (77%).
Whereas, inheritors placed adviser reputation (65%) as the top characteristic, with rapport with adviser (59%), personal recommendation (55%) and investment expertise (55%) topping the list.
