How can advisers help clients fund their children’s future?

For some, that might mean being able to afford to put their offspring through private education, while other clients may just want to be able to give their children a pot of money to help them buy a home or establish a career when they reach 18.

Some financial advisers may have far older clients with grandchildren who also want to understand what monetary help they can offer them.

Henrietta Grimston, relationship manager at Seven Investment Management, suggests saving for children is “a very personal thing”.

“Some wealthy clients may choose not to send their children to private school, but might instead embrace an ‘education budget’,” she says. 

If parents don’t want to pay for private school or university fees, then help towards a first property might become a more realistic option.Henrietta Grimston

“In other words, if the child wants to have a maths or science tutor to plug some learning gaps, or learn a language not taught by the school, or go on an expensive art course, they can.”

She acknowledges not all clients will want to educate their children privately or even pay for any type of education. In which case, there are plenty of other reasons to put money aside for their children.

“If parents don’t want to pay for private school or university fees, then help towards a first property might become a more realistic option. 

“Some might consider this a more effective use of resources than saving towards university tuition fees,” Ms Grimston adds.

Priorities

Lisa Lloyd, wealth planner at Sanlam UK, observes: “A financial planner can help you achieve your longer-term savings goals, and we’re finding that funding school fees for children and grandchildren is a key priority for many of our clients. 

“The sooner you start putting plans in place to fund such expenses, the better, as these costs could escalate further over the next few years.”

This means the adviser needs to start having the conversation with clients who are prospective parents or grandparents as soon as possible.

“Advisers should be fact-finding their clients to ascertain their total incomings and outgoings, especially when a child is born,” explains Rachel Springall, finance expert at Moneyfacts.co.uk. 

“It is at this stage where the parents should be guided through their options – such as saving for the future, any insurance plans or tax credits and any inheritance tax planning.”

Adrian Lowcock, head of personal investing at Willis Owen, points out that providing for their children is often one of the key objectives of clients with families, and so it will impact on a couple’s appetite for risk.

“The first priority for an adviser is determining what the client wants to do for their children and how much money they want to leave or give them in an estate.  

“Advisers can help parents understand what options are available and think about things they may not even have considered – such as a will,” he says.

He notes: “One other important consideration that often goes overlooked when thinking about your child’s future is ensuring that you do not become a financial burden on them later on in life, so make sure any money you give them is affordable.”

Financial education

Advisers may also want to encourage clients to educate their children about how to save and budget.

If clients have set aside money for them to come into when they turn 18, then it might even be helpful for the adviser to arrange a meeting with the child.

Kay Ingram, director of public policy at LEBC Group, says: “The most valuable financial gift a parent can give their child is to teach them how to manage money, to inculcate a savings habit from an early age, and to make them realise the value of money.”

She suggests financial advisers can assist in this by making parents aware of apps and educational tools that help children see the point of saving.

“Older children can be offered a financial review; this can be especially helpful when they first start work,” Ms Ingram notes. “Some 25 per cent of tax codes are issued in error, so by way of example, teaching those who are joining the workforce the basics of PAYE tax and helping them to understand tax codes can equip them to notice when something is wrong. 

“Advice on debt, mortgages and budgeting can also be invaluable.”

She gives an example: “One parent promised to gift £2,000 each to his daughters on graduation but before doing so asked them to research various investment options and to write him an essay on their research. 

“He wanted to incentivise them to improve their own financial capability.”

While this might not be the right approach for everyone, Mr Lowcock agrees financial education is the biggest gift a client can give their child.

“Financial worries are one of the biggest stresses in life,” he emphasises, adding: “You can use the Junior Isa as a tool to help educate your children on the importance and benefits of investing especially over the longer term.”

eleanor.duncan@ft.com