A financial planning expert at Quilter has said advisers need to have emotive conversations on taboo subjects like IHT planning to build relationships with beneficiaries ahead of the wealth transfer.
Rachael Griffin’s comments come after research from UK fund manager Octopus Investments found 67% of UK-based inheritors expecting more than £250,000 ($328,000, €287,000) do not have a financial adviser.
It also found that 83% of those inheriting £100,000-£250,000 do not have an adviser, with 87% of those inheriting less than £100,000 not having one either.
UK financial advisers have an untapped opportunity to expand their client base by building relationships with their clients’ beneficiaries.
Taboo
Griffin said to International Adviser: “Our own research has found many people still see inheritance as a taboo subject with just 37% of people feeling comfortable talking to their friends or family about it.
“While some might see this as a barrier, it could be seen as an opportunity for an adviser to help break down these societal norms which surround the subject and make sure that not only does a client get the best possible outcome, but their beneficiary does too.
“A financial adviser who can start these types of conversations with clients and their beneficiaries can start to build a new relationship with the next generation and show how valuable financial advice can be.
“This type of succession planning not only builds business resilience but presents a huge opportunity.”
Alex Shaw, director of Progeny Wealth, also spoke to IA: “The difficulty has sometimes been how advisers can offer a ‘light touch’ service for young adult children in a manner that is beneficial for the client but also profitable and compliant.
“This is likely to involve a lot of IT spend and a very long-term view of profitability. This may well put off many advisers but is a fantastic opportunity for those firms who choose to fully embrace an inter-generational approach.”
Barriers
According to the Centre for Economics & Business Research, generational wealth will increase to £115bn from £69bn in the next 10 years, while £5.5trn will pass between generations in the next 30 years.
But the Octopus Investments survey found most advisers surveyed said they had an existing advisory relationship with only 20% of their clients’ beneficiaries.
The majority (58%) of respondents said they are actively trying to develop these relationships, however almost all (95%) said they faced at least one of the following barriers:
Source: Octopus Investments
Making contact
AFH Wealth Management’s head of advice, Austin Broad, told IA: “All good financial advisers will understand the client needs and objectives on death and plan to achieve the right outcomes for the client in the event.
“Where possible, that will include contact with executors and trustees who are often also beneficiaries to ensure they understand their responsibilities.
“Many clients do not want their beneficiaries to have too much information about their plans in advance of death. While many advisers will be referred to beneficiaries, many of these, often from a generational perspective, may not have needs themselves to justify the cost of financial advice or may have their own adviser.
“When the client dies, the emotional impact and the competing family interests will mean there are differing motivations, personalities and priorities involved, which can result in decisions being driven out of short-term self-interest.
“Beneficiaries could look to realise their inheritance as quickly as possible, even if that’s not the wisest course financially. If the various parties don’t involve the deceased’s adviser, they may end up being unaware of crucial details or existing plans that could save tens of thousands of pounds of tax.”
Octopus Investments’ survey was made up of around 1,000 retirees over 65; 1,000 adults over 30; with at least one adult in retirement; and 200 UK financial advisers.
