In Focus: Intergenerational Wealth  

Are advisers ready for the intergenerational wealth transfer?

Are advisers ready for the intergenerational wealth transfer?

Over the next 30 years, the intergenerational wealth transfer is expected to be around £5.5trn, labelled as the greatest wealth transfer in UK history. 

Despite this, there is a huge disconnect between advisers and the inheriting generation.

Rhiannon Vallis, wealth director for Unique Financial Planning, puts this disconnect down to technology, platforms and the mass of information readily available on the internet.

FTAdviser in Focus caught up with Vallis on some of the biggest challenges for advisers when it comes to this transfer of wealth, and what advisers will need to do to prepare for it.

FTAdviser: Can you provide some context around why the rate of intergenerational wealth transfer is accelerating?

Rhiannon Vallis: The generation of non-contributory final salary retirees are realising that their children and grandchildren will not have the same opportunities – jobs are no longer ‘for life’.

Careers may mean moving away or daily commutes, and so the next generation are having to divert their incomes to contributory pensions, university fees, childcare and other things that weren’t needed when their parents were the same age. 

This triggers the movement of wealth as money is gifted to help with house purchases, school fees and so on.

The inheriting generation are also far more in debt than their parents, who typically paid their mortgages off in the early 50s, had their children young and on their way career-wise and so had a further 15 years of excess income to use to build up their savings and investments. 

FTA: What are some of the largest challenges affecting those inheriting wealth and those giving it?

RV: For clients who gift outright, rather than by way of a trust or in an accessible business property relief investment, the concern is not usually about their children but who they have married and the impact of divorce eroding the value of the gift. 

They recognise that divorce is incredibly common - new marriages and step-grandchildren also mean that more flexible solutions are required.

Concern about the potential need and cost of nursing care is always a consideration. At up to £60,000 a year, this eats very quickly into savings and the family home.

For those inheriting wealth, without a debt to put it against, the challenges are making sure they invest it with due care to their inheritance tax position as well as their own objectives. 

Many of our clients inherit their parents’ investments free of IHT on death and, for some of them, it is an amount of money they have never dealt with before. 

Intra-family disputes and allocation of assets, particularly with the demise of the nuclear family and complex relationships, can be a significant issue where clients haven’t made effective plans including wills, trusts and gifts.