Two topics that have been brought sharply into focus for Discretionary Investment Managers (DIMs) in recent years are intergenerational advice and ESG investing.
Although the reasons for this growing interest are myriad, there is a broad underlying theme of changes in the mood of our society.
Intergenerational advice is gathering impetus, especially in the current landscape, and families are thinking more about the wider implications of having plans in place that include beneficiaries and wider family members.
I think it is fair to say that the topic of intergenerational wealth has become more pertinent with the virus outbreak prompting people to think about their mortality.
Since March this year, client interest in wills and estates has gone up, suggesting increasing consideration of beneficiaries. What comes with that is the need for advice.
This subject is also on the radar of the regulator with a recent Feedback Statement published in July 2020 titled ‘Intergenerational differences: summary of responses and next steps Feedback to DP19/2’.
The FCA has a strategic objective to ensure that financial markets function well, and this recent paper is well worth a read as it gives the regulator’s thoughts on understanding the circumstances and needs of consumers, and how these can change.
When speaking to advisers, it seems a barrier to giving advice to the next generation has always been geography. If the son / daughter lives three hours away from their parents, and where the investment firm is located, is it cost effective to visit / service this next generation?
The answer to the question above may be technology; in the past six months, many advisers that had not previously adopted technology within their firms have now done so, whether willingly or not.
It may be this technology that will allow advisers to not have to focus on one geographical location, which could help address the intergenerational wealth gap.
I guess the question for firms is, is it worth considering intergenerational advice?
Well there is no doubt that this is a potentially lucrative market with five plus trillion of intergenerational wealth transfer that does not have an adviser associated with it, according to latest figures.
From a purely commercial standpoint, firms are now starting to think about how this shift in assets will affect their clients, and ultimately their bottom line.
Longer life expectancy also now means that wealth transfer events are occurring earlier in clients' life cycles.
This may be a positive point for firms, but most recent surveys on this area indicate that inheritors are unlikely to stick with the same adviser as their parents.
In fact, the figure of 90 per cent of financial advisers losing the relationship with the next generation on their client passing away is widely quoted.
As a result, this change in asset ownership can be seen as an opportunity for advisers, and with this opportunity will come access to a new set of clients.