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Almost half of financial advisers aren’t confident about retaining assets when client wealth is transferred – but most do not have strategies to address this

12 May 2022

46% of financial advisers aren’t confident they would retain assets under advice when wealth is transferred to clients’ family members, with only 10% very confident in their ability to keep client assets. Despite these low levels of confidence, the majority (59%) don’t yet have a strategy to address this potential loss of assets, according to new research published today from Octopus Investments, part of Octopus Group.

Octopus conducted research to examine the relationships between the financial advice industry, advised clients and their families, and what happens when wealth is transferred to spouses or children.

The research points to a perception gap between the financial advice industry and those inheriting wealth. While financial advisers lack confidence in retaining assets, there is a bigger opportunity than they realise. 67% of those inheriting a significant sum of money said they intend to seek financial advice and 75% were open to using the same adviser as their family. For those inheriting wealth from family members, 56% said they would use the same adviser because they’d provided good advice and increased their family’s wealth.

More than half (52%) of advisers believed a priority for beneficiaries would be paying off their mortgage or other debt, providing little opportunity for financial advice. However, only 15% of beneficiaries said this would be their priority.

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.”

Alan Marks, Managing Director, Harrison Spence, said:

“When I meet an adviser looking to sell their business, one of the key things I ask is whether they’re doing later life planning with every client. Firms could lose 15% to 20% of real value by not preparing and spending the time with the families and potential beneficiaries of their clients. Intergenerational planning is a critical part of that long term focus on future proofing their businesses, along with recognising the importance of developing trusted relationships with clients’ wider networks.”

Of those that do intergenerational work, 96% say they invest time in meeting the kids, and grandchildren, and building relationships with the clients’ family, 11% provide educational resources to family members, whilst 7% are investing in digital solutions – especially now that 19% of potential beneficiaries are interested in digital advice, rather than face-to-face; a further 7% are actively hiring more female advisers and younger talent.

More focus needed on managing the wealth of women

As women live longer than men, they are likely to emerge as the biggest beneficiaries in the ‘great wealth transfer’, yet the findings of the survey suggested more would need to be done to capture female wealth.

Among inheriting respondents who said they wouldn’t use the same adviser as their family, women disproportionately said it was because they had another adviser they would use. This was cited by 40% of female spouses versus 29% of male spouses and by 42% of female beneficiaries, compared to 13% of male beneficiaries.

Despite these statistics, only 5% of financial advisers had a dedicated strategy for advising and retaining women.

Ruth Handcock said:

“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. For women that could be someone who shares their gender, but equally it may be someone that is passionate and knowledgeable about using wealth for doing good in the world. In this regard, diversification of talent – whether gender, background, experience or any other variable – will be key. 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 likeminded women in a social setting.”

Octopus wealth transfer tips

Alongside the research, Octopus spoke with advisers to develop some top tips for preparing for the successful transfer of wealth and retaining assets under advice:

  • Start the conversation earlier

It might seem like an obvious point, but you don’t want the first time you meet the beneficiaries to be when your client has passed away. Depending on the age of the client, you’ll want to start building the relationship with their beneficiaries now. Help them understand the planning you are putting in place. Prepare them for the wealth that will come to them. The more engaged they are now, the more likely they will seek your advice when they inherit.

  • Make intergen integral to your process

Have a collective approach in your practice where everyone is thinking about intergenerational planning. You don’t have to lead with engaging the next generation, but it should always be on your radar. When you meet a new client, ensure that questions about their children and wider family form part of the fact find. Use natural opportunities to meet the beneficiaries, for example, when putting trust planning in place, or by offering to have the children attend meetings as a client grows older and more vulnerable.

  • Don’t assume there’s no opportunity to advise the beneficiaries

Some advisers are wrongly discouraged from engaging the next generation, because they believe their client’s beneficiaries will spend their inheritance. While this can be the case, beneficiaries tend to feel a sense of responsibility to their inheritance and don’t want to waste it. You’ll often find that some, if not all the inheritance, is set aside and investable.

  • Understand what beneficiaries truly want and need from financial advice

Establishing the motivations, goals and requirements for beneficiaries, both female and male, from the outset will help to remove assumptions from the equation. These could be assumptions that beneficiaries want the exact same things as their families or spouses, but also gender-based assumptions that only serve to reinforce misgivings about financial advice. Spending time to find out whether new beneficiaries have particular priorities for their wealth or preferences in how they’re engaged and advised, can really pay dividends.

  • Diversify your talent pool to ensure your advisers reflect future beneficiaries

Looking at your talent pipeline now with the lens of ‘do these advisers reflect the next generation of beneficiaries and their priorities and preferences?’ will help to ensure that you are giving yourself the best shot of attracting and retaining future wealth owners. Don’t just look at gender diversity either. Consider everything from people’s ethnicity, education, family background, neurodiversity, soft skills, digital or technological capabilities, or knowledge of certain topics like sustainable investing.