Are advisers ready for the great wealth transfer?

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Are advisers ready for the great wealth transfer?

Ahead of the great wealth transfer, advisers need to be aware of the changing face of wealth, as younger, diverse clients pose a new set of challenges and opportunities. 

Alex Loydon is director and partner, engagement and consultancy at St James's Place. Speaking to FTAdviser in Focus, she shared her thoughts on how advisers need to shape intergenerational wealth planning.

FTAdviser: How can advice firms bring new blood into the industry?

Alex Loydon: Advice firms need to think about entry points into the profession for younger people and those from different social, economic, cultural and educational backgrounds.  

Ultimately what they want, and need access to, are sponsored, relevant and proper training and development programmes at all levels – whether they are school leavers, apprentices, graduates or second careerists.

In addition, they should enable access to brilliant role models and mentors, with a diversity lens on all aspects of their business. Ultimately, it’s fundamentally important that they have the right proposition for a new generation of target clients. 

FTA: What do you feel are the main barriers to attracting more diverse advisers into the industry?

AL: Traditionally, the lack of regulation was a barrier. Being an adviser wasn’t necessarily a career aspiration. It wasn’t deemed to be a profession in the same way as law or accountancy, for example, and there were few structured entry points into the profession.

That has now changed and with training options such as the SJP Academy and Quilter's Training school, it has improved the perception and practices of the profession.

However, we need to be pushing these entry points in the right arenas, raising awareness with schools, universities and career advisers. The lack of financial education in schools remains a big barrier.

Young people are not given a reason to discuss and talk about money and wealth. 

Put simply, they don’t understand it, and so it still in many respects remains the preserve of those that grow up around wealth.

In addition, recruitment strategies and interview processes can be barriers. Hiring managers can sometimes be guilty of recruiting candidates similar to themselves, so blind recruitment processes and more tailored and inclusive interview questions could help attract a broader range of candidates.  

FTA: The Great Wealth Transfer is about to take place. A new generation of more ethnically, socially and gender diverse, differently-minded young people will receive a lot of money over the next decade. Is the financial advice industry equipped to serve these new potential clients? 

AL: The objectives of the next generation are going to differ and it will be the responsibility of financial service businesses, and their advisers, to ensure they are equipped to meet these changing demands. 

They must be responsible businesses themselves, reflecting the values of the next generation and the type of business a new generation of client wants to deal and be associated with. I think the industry is waking up to this, but not all advisers are and they will need to, if they are to secure the clients of the future. 

FTA: Is there room for a new "face" of intergenerational wealth advice to develop? If so, what would it look like? 

AL: There is an increasing demand for advice and, as wealth passes into the hands of the next generation, the need for advice is only going to increase. In my view, the focus is going to change. 

Traditional pension planning is less relevant to the next generation; there’s less ability and incentive to save in the same way. We are likely to see more of a focus on fees and returns, with a generation potentially more knowledgeable and inquisitive than their parents and grandparents, given the ease with which they can access information. 

As the next generation tends to be more comfortable with change, I see a greater frequency of life transitions. With a desire to ensure their own wellbeing, instant results and gratification and less toleration of untailored output, I believe there will be an expectation of comprehensive, flexible advice and service, delivered well. 

The industry will need to evolve and find innovative ways to capture and retain this growing client bank. I think a new ‘face’ of advice will be a combination of face-to-face and digital.

Technology will help deliver a lower-cost proposition, with products and services tailored to meet a more diverse client group and a focus on ESG, delivered by a diverse group of advisers that look, act, sound and operate differently from each other.  

FTA: How can you help clients prepare for the generational wealth transfer?

AL: Engagement and education is essential and a large part of getting this right is an appreciation for the need to ensure diversity, especially within client facing distribution teams.

A new generation of more ethnically, socially and gender diverse, of differently-minded young people, are not all going to want to be engaged by today’s typical adviser.

A recent RBC Wealth Transfer study estimated that only 35 per cent of inheritors are prepared by their families or donors to inherit wealth. In my experience, where beneficiaries are prepared and there’s a plan in place, this creates confidence and trust, with a greater willingness to engage with advice.

As wealth management businesses and advisers, we can play our part by offering pro-bono advice, engaging with local schools to support financial literacy and education programmes.

We should also encourage families to talk more about money, wealth and protection and ensure our businesses represent an increasingly diverse society.

FTA: Can we draw any links between the impact of Covid and the future of intergenerational wealth? Has it hindered or brought plans forward?

AL: It depends on age and personal situation. Covid-19 has naturally had an impact. Sadly, some people had been directly impacted and wealth transfer plans have been forced forward. 

Others have started to help the next generation earlier than planned, because many millennials have been financially disadvantaged to a greater extent than the older generations.

In addition, some Gen X and millennials have actually saved money during lockdown – no travelling, no going out, reduced spending - and have therefore been in a position to start accumulating savings.

It’s also forced people to think about their own situation and afforded them more time to start or address the ‘to-do’ list, bringing forward a whole array of plans.

This has included simply talking to each other about their plans, taking advice, saving and investing, making a will, supporting those furloughed or out of work and gifting their wealth. It’s meant entering into conversations about money in a way that didn’t happen before.