In Focus: Tax Year End  

Platforms need to adapt to intergenerational wealth planning

Andrew Back

Andrew Back

As our lives become more global and family structures more diverse, the demand for intergenerational wealth advice has stepped outside of its family office origins and now firmly impacts upon retail financial advice.

Traditionally, demand for intergenerational advice was largely found among single and multi-family offices working with extremely wealthy clients. But today, as the country becomes increasingly wealthy and asset values rise, particularly through family property ownership, there are more and more families with three or even four living generations who now need help managing their wealth.

The UK has one of the highest inheritance tax rates in the world at 40 per cent, seen as eye-watering to those paying it out of money for which they have been taxed already. To those caught out by IHT, intergenerational tax planning is absolutely critical.

What's more, looking at the big shifts behind this trend, it becomes clear why demand for intergenerational advice could be here for the long term.

For decades succeeding generations have enjoyed higher living standards than the ones before – until now. Today, there is a significant gap between the financial fortunes of millennials, their parents and also their grandparents due to a range of factors, including house price surges experienced by older property owners and high student debt and expensive rents for younger generations.

Families in this position will undoubtedly value the holistic financial planning services that an adviser can provide, but there are also requirements for services and technology that are currently not so commonplace in the retail platform market to enable this advice to be given effectively.

Platforms and family linking

Intergenerational advice requires advisers to treat family clients as a group planning exercise and well-designed and efficient technology can make this complex issue a whole lot easier.

This is where a platform with a family office background can come in by facilitating the creation and maintenance of a family group, otherwise known as family linking, and deliver an appropriate service.

While a significant number of retail platforms offer some form of family linking, often this does not extend beyond offering pricing discounts for family groups in light of the increased assets this will bring onto the platform. And there are sometimes limitations as to which family members can be included in the group, which, given that several generations of extended family may be involved with intergenerational wealth transfers, could prove restricting.

Flexibility or customisation is a necessary feature of the platform chosen to provide the service.

In order to truly be able to treat the family as a group, the platform should enable the adviser to do things like view all the group’s assets in one place and generate all the reports that are normally available for an individual client – valuation, fee and performance reports – for the whole family group or variations of smaller groups from within the family.