How can you survive and grow as a Financial Adviser?

Adviser firms are likely to lose assets under advice when clients die or distribute wealth to their families. The client relationship inevitably ceases and there may well be a gap, with the funds going elsewhere. This is common where the adviser hasn’t established earlier links with the client’s family or is seen to be out of touch with the next generation’s needs and aspirations.

As the current generation of baby boomers pass on more and more of their wealth, the rate of transfer will increase dramatically, with many billions expected to be transferred to beneficiaries over the next 10 years. This wealth transfer will drive your business over the next couple of decades and beyond. Therefore, it is important to understand how this new type of client differs and how you can engage with them now, supporting the client through this process as their trusted adviser.

How are the next generation of clients different?

The lives of the under 50s – those starting to inherit over the next 10 years – are crucially different from those of their parents in at least six key ways.

1. They will inherit later, because their parents are living longer. Many will be in their 60s, which is some time after they themselves have set up homes and educated children. 
2. Property is much more expensive in relation to their earnings than it was for their parents. Back in the early 80s, average house prices were less than 4 times average incomes. Now house prices are over 7 times average incomes.
3. University education is much more expensive than it was 40 years ago, so student debt is a huge burden.
4. School fees have become much more expensive in real terms with average rises of 6.6% a year between 2000 and 2010, and 3.9% a year since 2010.
5. They are the ‘sandwich generation’ with many caught between caring for elderly parents and still supporting student or young adult children.
6. Pensions will be less generous for most people under 50 with the rundown of DB pensions, lower funding of DC pensions and generally lower state pensions.

As a result of these factors, they will be much more dependent on inheritances and lifetime gifts. So planning for them will be different from the financial arrangements for previous generations.

How can you better support your next generation of clients?

Recently Charles Stanley published a white paper in conjunction with Platforum about working with the next generation of clients. The aim in publishing this paper is to provide some practical help to financial advisers, financial planners and wealth managers with one of the great challenges facing the profession. That is: how to make sure that you continue to serve the offspring and families of the clients who are currently the bedrock of your business.

The research and the white paper looks to go beyond the weighty demographics and business statistics that have characterised the recent slew of publications on intergenerational planning. The white paper, named ‘Book of Stories’ draws on the experiences and expertise of Charles Stanley investment managers and advisers to provide the themes and illustrate them with their own personal stories and comments. 

Three key takeaways from Charles Stanley’s Book of Stories

1. Family money is crucial. Successful advisers will increasingly look after the finances of entire families rather than just individual clients. The younger generation mostly face greater financial challenges than their parents and grandparents – especially in relation to buying homes, paying for education and providing for their retirement. The older generation want to help and they look to the financial advisory profession to advise them.
2. Lifetime gifts have become more important in many families. The bank of mum and dad has become a central institution in many lives. The younger generation often cannot afford to wait to inherit – they need assistance in their 30s and 40s. Inheritance tax planning is important, but often more as a constraint on action rather than a key motivator.
3. Making outright gifts to the young can be risky – for those who receive, as well as for those who give. Advisers will be increasingly called upon to help several generations with their investments and wider financial planning. And it will require tact and diplomacy to navigate the potential emotional upsets and conflicts of interest.

However, providing whole family advice opens up valuable opportunities to build even more sustainable businesses based on the strong foundations of long-term relationships with generation after generation.

Download a copy of the white paper for free

Visit www.charles-stanley.co.uk/advisers/book-of-stories to get your free copy of the Book of Stories, Charles Stanley’s industry white paper, which seeks to share know-how with financial advisers about retaining family wealth business. Within this paper they share personal experiences from a company that has been around for more than 200 years, to help you with practical guidance on how to make the most of the great wealth transfer.

This is a Charles Stanley Paid Post. The news and editorial staff of the Financial Times had no role in its preparation