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.
Trusts are a key part of IHT planning and intergenerational portfolio management, but it is quite unusual for retail platforms to allow these to operate flexibly and effectively as part of a linked group.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.
Assets, wrappers and trusts
Some family groups will have simple investment needs but certain generations, particularly those requiring an income in retirement, may have more complex and flexible needs.
A platform must therefore have the scope to support those with the simplest requirements, whether it is access to Junior Isa wrappers or a UK equity fund, while also having the ability to trade assets required for more complex investor portfolios and provide multi-asset, multi-custodian, multi-jurisdictional and even multi-custodial services if required by wealthier families – this is business as usual for platforms operating in the family office space.
Trusts are also a key part of IHT planning and intergenerational portfolio management, but it is quite unusual for retail platforms to allow these to operate flexibly and effectively as part of a linked group.
It is similarly unusual to be able to give a full range of flexibilities on fees for family groups, as well as reporting at a group level.
Platforms that have extensive experience of working with family offices and wealth managers offer sophisticated solutions in these areas.
For advisers looking to deliver high-quality service to the unique and changing needs of their clients, it might be that they need to step out of purely looking at traditional retail platforms.
Our industry, and platforms in particular, are an essential part of this process and need to adapt their processes and service offerings to successfully fulfil these changing requirements, customised to the family needs.
Andrew Back is chief commercial officer at Multrees Investor Services
