Will demand increase with an ageing population?

With so many people living longer, even if they are suffering from ill health, it is more likely they will continue to need advice about their changing financial circumstances into old age.

Fiona Tait, technical director at Intelligent Pensions, explains: “Statistics show that wealth is concentrated in older age groups, particularly the baby boomers, who will naturally be looking for ways to pass this onto their chosen heirs. 

“At the same time, people are living longer and will need to ensure that they retain enough income and wealth to sustain them through old age.”

She believes: “Advisers are ideally placed to help people balance the need to meet their own expenses, including those that might arise in old age, with the desire to pass their hard-earned money to the people they want to have it, as tax-efficiently as possible.”

As the chart below shows, wealth is accumulating among the older generation.

Source: Wealth and Assets Survey, Office for National Statistics

Mark Moran, director of intermediary sales at Golden Charter, suggests clients are confronting their end of life planning options, citing figures which show that more than 200,000 people planned their funeral in advance in 2017.

“Many of those will be clients of financial advisers and an increasing number are talking to their adviser about the subject,” he says. 

“Therefore, in my opinion, it is becoming more and more natural for clients to expect subject matter of this type to be raised at client meetings, and for the adviser to be able to offer a range of solutions to all elements of later life, whether that’s help with care costs or planning the specific elements of their funeral service.”

He notes: “If advisers broach the subject around end of life in a proactive but sensitive manner then I’m absolutely certain they’ll be surprised at how many clients have firm thoughts on these subjects.”

Poised for growth

The pension freedoms, which have created numerous options for those reaching or in retirement, mean clients are likely to seek advice more frequently in their later years.

Stuart Wilson, Zurich’s head of retail platform strategy, confirms the market for end of life planning is poised for significant growth, and that this is driven by the increasing demand for drawdown over annuities.

He explains: “Drawdown requires people to make complex investment and withdrawal decisions far into old age. 

“We found almost a third (30 per cent) of people already in drawdown will rely on an adviser if they become too old or ill to manage their pension.”

He adds: “A further two in five (39 per cent) said they’d rely on their partner or family if they can no longer look after their drawdown finances, who in turn might speak to an adviser.” 

“Advisers need to ensure they are adapting their businesses to cope with the needs of a growing number of older clients, some of whom might be vulnerable customers.”

Thinking about how to fund long-term care costs should also be a topic advisers urge their clients to discuss.

Tim Bennett, head of education at Killik & Co, reasons: “Forethought is especially important now that the pension rules allow for the inheritance of pension assets, which in some cases will be a sizeable chunk of someone’s total estate. 

“With long-term care costs mounting all the time, thought also needs to be given to ensuring that sufficient assets are available to meet them and provide the level of care a client expects.”

Some will prioritise enjoying their money while they can, others will face unexpected expenses, such as long-term care, and some will be fortunate enough not to need their pension to support them in their old age.Fiona Tait

The later stages of a client’s life can bring plenty of opportunities and possibilities, and there are often any number of financial decisions to be made.

In which case, what should take priority? 

Is clients’ biggest concern avoiding inheritance tax (IHT), leaving a legacy or simply being able to pay for care costs and a funeral?

As Mr Bennett observes: “Each person will have different priorities. For example, not all clients are seeking to avoid IHT – some are happy to pay what they see as their fair share. 

“Whatever their specific priorities, as a general rule, we would advise clients to ‘put their own life vests on first’ – planning for retirement and long-term care, for example, should not normally be relegated below providing for children and grandchildren.”

Known unknowns

As with most stages of life, there are plenty of uncertainties to contend with.

“Some will prioritise enjoying their money while they can, others will face unexpected expenses, such as long-term care, and some will be fortunate enough not to need their pension to support them in their old age,” Ms Tait notes. 

“The financial plan needs to take this into account and adapt as necessary when things change.”

Clients’ biggest concern is usually the uncertainty inherent in end of life planning, according to Joe Roxborough, a chartered financial planner at Ascot Lloyd.

“Most plans we make in life – retirement, moving, having children or not – are under our control to some degree. Death, however, is both inevitable and unknowable,” he acknowledges.

But he thinks: “Avoiding IHT is probably the largest concern, along with its counterpart ‘how much is enough?’.  

“Cash flow modelling and planning with other family members gives the client the best tools to visualise the future, both for themselves and for their descendants and, although nothing is guaranteed other than death and taxes, we can at least create the best plan possible, which is better than no plan at all. 

“I believe this is one of the most important parts of the advice process, as it combines all elements of planning – protection, pensions, investment, tax, risk – concerning both a complex and emotional area, and where the costs involved in incorrect administration can be enormous.”

Supply and demand

Scott Gallacher, chartered financial planner at Rowley Turton, is in no doubt that changing demographics will boost demand for help with this type of financial planning, but he flags that a shortage of advisers could lead to supply issues.

He suggests: "While most of the general public should be concerned about being able to afford a decent care home, many are more worried about passing the family home onto their children.

"This has seen some gifting their homes away or using expensive and debatable estate protection trusts, both of which approaches may not work due to the ‘deliberate deprivation’ rules on care fees.

"For advisers’ clients, IHT features more prominently as our clients typically have larger estates and are more at risk of IHT."

eleanor.duncan@ft.com