How to consider future generations when passing on wealth

This article is part of
Guide to intergenerational wealth transfer

Both Rathbones and JPMorgan run financial awareness courses for clients’ children and grandchildren and produce useful, relevant booklets, while St James’s Place delivers face-to-face financial sessions in schools, having reached 22,000 young people since 2014.

Methods of engaging children early include involving them in conversations about inheritance tax or long-term care planning, asking clients whether they have considered power of attorney (which is typically held by the children), encouraging the use of children as trustees of trust funds, and promoting Junior Isas and self-invested personal pensions.

Darius McDermott, managing director of Chelsea Financial Services, says: “Junior Isas are the most popular as they have generous contribution limits of £9,000 a year and they become the child’s at 18, when we find some children maintain the money with us in adult Isas. We find Junior Sipps tend to be used mainly by higher earners who have used up Junior Isa allowances.

“Existing clients who are parents or grandparents often enquire saying they would like to put some money away for a new child, and we can produce compound return tables to prove the earlier you start, the better. Regular monthly contributions totalling £9,000 a year for 18 years can compound up to more than £260,000, assuming a 5 per cent growth rate.”

Adapt your approach 

One major potential barrier, however, is that many advisers are much older than the generation they are targeting, so it is important to adapt accordingly.

Adrian Lowcock, head of personal investing at Willis Owen, says: “You’ve got to be aware of young people’s shorter-term attention spans, so talk to them about companies they understand like Netflix and Spotify. The Abrdn rebranding shows an understanding of this need to engage with a younger audience.”

Nick Bird, head of strategic growth at Octopus Investments, adds: “Thick carpets and mahogany desks might not be the best way of connecting with the younger generation, who may appreciate more modern-looking offices and less formal dress codes. Websites also need to be brighter and more engaging and with a lot more video content.”

The importance of best-in-class technology to offer younger people a seamless experience cannot be underestimated. Indeed, Santander UK reports the fastest growing segment of its online investment platform is people under 30.

But there are many aspects of a good adviser’s skillset that machines can never replicate. For example, some clients may only want to provide for children from a current marriage and not from a previous one, and others may have reservations about children knowing how much they stand to inherit. Such areas will always be crying out for the human touch.