Intergenerational wealth transfers have been the trend on everybody’s lips within the advice sector for years now, with trillions of pounds set to pass to younger generations within the next couple of decades.
This clearly creates a great opportunity for advisers to both attract and retain younger clients and their future wealth.
But what are they doing about it?
According to Schroders’ 2020 UK Financial Adviser Survey, the answer is not much.
In a poll of 125 advisers, 79% admitted to not having a differentiated sales and marketing strategy that specifically targets younger investors.
This shows a very small improvement from 2019, where 80% provided the same response.
Lack of focus on the young
Yet 78% believe that the transfer of wealth creates an opportunity for their business.
Advisers’ attitudes throughout the pandemic, however, showed that there needs to be a strategic change if they want to be involved.
This is because just 18% said they put considerably more energy into attracting new clients during the covid crisis, Schroders found.
This compares to 54% increasing the time spent focusing on their long-standing clients.
Many said the pandemic forced them to use digital channels to either keep or build relationships, which made it challenging as 40% of Personal Finance Society members reported losing new clients as a result.
Additionally, a much lower number of advisers have a minimum asset size of less than £50,000 ($66,188, €55,780) when onboarding new clients – specifically 43% in 2020 compared to 52% last year.
Nearly half (48%) require between £50,000 and £200,000, a threshold that is often unattainable for younger customers.
Similarly, the biggest cohort of advisory clients (67%) is made up of people aged 51-64, followed by 24% aged 65+, and only 9% of clients are 20- to 50-year-olds.
What about women?
A third of advisers, however, do have specific propositions targeting the transfer of family wealth to the next generation, but this leaves a large majority of the sector failing to tap into this space.
One area of wealth transfers that, more often than not, is completely overlooked is the role that women play within it, said Gillian Hepburn, intermediary solutions director at Schroders.
While presenting Schroders’ findings at a virtual event attended by International Adviser, she said that women are often the first point of a wealth transfer – especially those who are divorced or widowed – but too many times they are not even part of the picture.
The asset manager’s research showed that 91% of advisers lack a differentiated strategy for attracting, retaining and advising women.
As a result, approximately 70% of women changes adviser when they inherit wealth, Hepburn added.
The right solution
She continued: “I think the biggest challenge for advisers is thinking about a proposition for that next generation and how do we deliver that profitably.
“But my message is: always point to the opportunity and think about the long-term impact on your business, if you don’t actually retain client assets.
“Now, the challenge about not doing this could be destroying the future value of your business, at the very point where advisers are trying to look for an exit strategy. Clearly, reduction in assets is potentially there for a reduction in any business valuation, as advisers are telling us that they’re looking to exit the industry in the next five to 10 years.
“Often we forget about women when we talk about wealth transfers, whether we think they’re not profitable or we don’t have a proposition, but actually, I think we shouldn’t forget that the first point of wealth transfers is very typically across to women.
“There are some scary numbers about the amount of wealth that that will be held within women over the next few years, so there would be an opportunity for advisers to think about how they need to have a marketing and an advice proposition for women who maybe think a little bit differently and have a slightly different focus.
“And, typically, they are more risk averse and so what can we do to deliver the right kind of solution for them?”
