The great advice transfer
When we consider these factors, the Vanguard Advisory Research Centre believes we are likely to see a shift from a smaller number of larger investment portfolios held currently by the over 60s, to a larger number of smaller portfolios – at least initially – held by their eventual inheritors.
What we see today would also indicate that, aside from having new owners, much of this wealth will also be managed by a new adviser – or in some cases no adviser.
These inheritor relationships are likely to become more competitive, with some advisers successfully building their practice upon this wealth transfer, while others struggle.
Preparing for the future
As the great wealth transfer gets underway, advisers that find a way to engage with the next generation in the right way and at the right time will enjoy a considerable advantage.
Understanding gender and age differences could be the key to retaining client trust and confidence during the wealth transfer process.
To facilitate engagement, flexibility is often required. Advisers may need to meet with family groups in different configurations according to the desires of the main client, or assign specific advisers to specific descendants or groups of descendants.
Furthermore, wealthy individuals in particular may wish to implement certain guardrails, including specific levels of disclosure relating to asset values.
Family relationships also shift and fluctuate, and there is no guarantee that a client’s initial set of priorities will remain static throughout the advisory process.
Frequent and continuous contact enables advisers to develop an offer that matches and evolves with client needs.
Firms may also wish to consider the development of specialist wealth transfer propositions that go beyond traditional financial planning and investment solutions.
This could, for example, involve complementing the firm’s advisory services with a network of trusted service providers that might include lending brokers, tax advisers, solicitors, insurance brokers and more, depending on their relationship with the client.
A specialist approach can free up time that can be spent building relationships with clients and having the necessary, often emotive, conversations with clients around legacies.
It can also potentially allow the adviser to handle a larger number of clients, including simpler wealth accumulator clients.
Financial advisers have provided an invaluable service in helping a generation achieve financial prosperity.
However, as trillions in wealth passes from one generation to the next over the coming decades, financial advisers must ensure their practices are prepared to address this shift.
Warwick Bloore is a senior specialist at Vanguard Advisory Research Centre
