Financial advisers are losing billions of assets under administration by failing to get clients to draw their family trees, Octopus Investments has warned.
Speaking at FTAdviser's Tax Efficient Investing event today (February 5), Nick Bird, senior business development manager of Octopus Investment, said his company’s estate and probate team had uncovered that advisers were losing cash by failing to engage in intergenerational planning.
He said a poll of inheritance beneficiaries his business deals with revealed eight out of 10 did not know who their parents' financial adviser was.
Currently, Mr Bird said just one in four advisers who work with Octopus through probate were advising beneficiaries.
He said: "There are gaps there. If advisers had better processes in place then there wouldn’t be gaps there.
"Think about the difference you did make. Money is just a number. It is about opportunity and fun. It is about retaining your assets and who deals with them.
"Intergenerational planning is key to legacy planning with your business.
"Advice firms are losing assets under advice every year due to not having a strategy in place."
When quizzed by Mr Bird, advisers in the packed room conference room at the Financial Times revealed they were more likely to go down the generations when talking about finance rather than talk to clients about older dependants.
Mr Bird shared the tactic of one adviser who draws a client in the centre of a piece of paper and then asks them to draw a family tree around themselves.
He said the adviser then uses this drawing to discuss the financial needs of those on the piece of paper and cash that could come across generations.
However Mr Bird said advisers should consider whether they are currently capable of engaging with an array of generations.
He said: "We hear advisers saying they had a lot in common with their 70-year-old clients but what about their grandchildren, who are their beneficiaries?
"People don't want to deal with their father’s financial adviser as it is a bit like seeing the head master.
"Maybe for the younger advisers, think about how do you engage? How are you thinking about some of the soft skills around that?’
"It is all about engaging all the way through. Always engage the next generation down and perhaps even risk profiling them. Engage with the emotional side of estate planning."
Martin Bamford, chartered financial planner at Informed Choice, said: "Advising between generations is a big challenge for financial planners.
"There’s often little communication about financial matters between parents and children.
"Where families do carry out an element of inheritance planning together, the focus for adult children tends to be on using inherited capital to repay debt. It’s very tricky indeed for us to continue managing portfolios once inherited."
He added: "Having a good understanding of family relationships is an important part of the financial planning process, but it’s difficult (sometimes impossible) to build close working relationships with the next generation."
emma.hughes@ft.com
