Investments  

What are the real implications of intergenerational wealth transfer?

  • Describe the issues around intergenerational wealth transfer
  • Identify changes in the population affecting wealth
  • Explain the advantages of using a trust
CPD
Approx.30min

How are young people being impacted by the ever-changing ecosystem of the industry?

More young people are being drawn into the world of investment than ever before, with stories like GameStop piquing their attention earlier this year. DIY platforms such as interactive investor reported a 2500 per cent surge in the number of 24–30-year-old investors using its platform in the final two weeks of January. This has led to growth in the total spend on debit and credit cards to investor brokerages on DIY platforms doubling in 2020 and is now 400 per cent higher among 19–29-year-olds.

Earlier this year, Freetrade added over 40,000 accounts in one day – 10 times its daily average. Of these accountholders, 80 per cent are under the age of 35. Engaging with the younger generation is a great opportunity now, particularly when we learn that from a recent study by Prudential UK called Family Wealth Unlocked that two-thirds (67 per cent) of people whose parents have a financial adviser also use the same adviser.

The valYOU Proposition – Creating a number of stories, not a story of numbers

Comparison is the killer of contentment. We know that this area of advice is very holistic and at times emotional, an integral part of this type of financial planning for which there is no algorithm.

So how is the market innovating its tools in allowing this industry of financial architects to elect a suitable suite of weapons to facilitate this ‘stories-under-management’ style of planning being as holistic as possible?

How are these tools being used to protect and preserve family wealth intergenerationally whilst also mitigating IHT intergenerationally? How are planners having to adapt their planning process, if at all, to incorporate the younger generation to preserve generations of planning for the future? As Edward Counsel once said, “if we could unfold the future, the present would be our greatest care”. 

Protection providers are starting to incorporate products such as Children’s CIC into Business Protection policies, but in terms of wider planning opportunities, there are products and providers that can be combined to protect and preserve family wealth intergenerationally, while also mitigating IHT intergenerationally.

For example, the Way Group offers the Inheritor Plan which is a flexible plan with potential reversions to the settlor on each anniversary, along with the ability for trustees to appoint or loan money to the beneficiaries at any point.

Along with a 125-year perpetuity period, this plan allows advisers to protect and preserve the wealth of their clients intergenerationally. The most common uses of the loan facility are to assist beneficiaries with buying a house outright or with a deposit or supplementing a surviving spouse/civil partner’s income.

Few (non-trust) intergenerational wealth transfer strategies have the same level of family wealth preservation (particularly with the use of loans) while also having the ability to invest in conventional lower-risk assets.