Retirement Income  

How 2020 brought later life planning into sharp focus

  • Explain the challenges of the pandemic for later planning advisers
  • Explain impact of potential tax changes
  • Explain the crucial elements of later life planning
CPD
Approx.30min

The great wealth transfer  

Another challenge that has gained pace over the last year is the intergenerational transfer of wealth. £5.5tn is expected to change hands by 20553, and sadly this has accelerated due to the number of additional deaths recorded in 2020.

While there is the initial planning requirement to help your clients manage the transfer of their wealth in a tax-efficient manner, so up to 40 per cent of the clients’ assets aren’t lost on transfer, there is another additional challenge that wealth managers need to face up to.

That is the reluctance of the next generation to use a professional financial planner in favour of apps and other digital platforms, as they have yet to fully understand the value that these professionals can bring. 

However, later life planning can provide an invaluable opportunity for wealth managers to engage with the wider family and demonstrate that value.

Investors should be encouraged to discuss their financial plans with their beneficiaries and in turn, this exposes the invaluable work of the financial adviser. This conversation might even open the door for wealth managers to meet directly with beneficiaries, discuss the planning in place and offer some options for future wealth management. 

Planning for well-being and care can provide a similar opportunity. Any care advisory service put in place by the wealth manager should be discussed with the wider family, making them aware of the provision, especially in times of crisis or diminishing responsibility. 

Through these simple steps, all advisers can improve on their chances of retaining clients at such a vital time.

Finding a solution

Having considered the shifts we have noted in 2020, what are the crucial elements to later life planning? 

First, all advisers should focus on the client’s intended outcome. This will normally be to preserve their wealth and enable it to steadily grow, whilst retaining optimum flexibility in case their life circumstances change - for instance long-term care.

This means that any investment solution will need to produce a meaningful long-term real return after charges and volatility should be mitigated as a priority, as in the decumulation phase of clients’ lives it is a corrosive force to both their portfolio values and their well-being.

Many clients may also then want to consider engaging in estate planning, ensuring the maximum amount goes from their estates to their chosen beneficiaries.

There are two major factors that need to be considered with all estate plans. Firstly, how can we deliver the largest estate before, or on, the death of the client. Secondly, how can we minimise any losses arising due to the death of the client, specifically from IHT.