InvestmentsJun 25 2019

Intergenerational wealth: Dealing with the great division of assets

  • Learn about the FCA's recent intergenerational differences paper
  • Understand how advisers can serve the needs of different demographics
  • Graps the challenges for advisers providing intergenerational advice
  • Learn about the FCA's recent intergenerational differences paper
  • Understand how advisers can serve the needs of different demographics
  • Graps the challenges for advisers providing intergenerational advice
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CPD
Approx.30min
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CPD
Approx.30min
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CPD
Approx.30min
Intergenerational wealth: Dealing with the great division of assets

If history has anything to go by, shifting too much responsibility to consumers is unlikely to deliver the desired outcome. There are also question marks over what powers the FCA truly has to address the issue.

Hayley North, chartered financial planner at Rose and North, would like to see the regulator make it easier for advice firms to deliver low-cost, simplified restricted advice alongside full independent financial planning.

“We have looked into this many times and we really struggle to work out how to deliver what we want to be able to deliver,” she says.

“Younger clients typically have less disposable income and fewer assets, making servicing them in the early years challenging and not cost-effective. More creative solutions to the advice process would enable us to more competitively price our advice at these life stages, ensuring that younger people end up better off later in life.”

In view of all the existing constraints, better-off families are conscious of the increased role they may have to play in safeguarding their descendants’ financial futures. As a result, the role of advisers is a pivotal one. Clients often want the double benefit of reducing their estates for inheritance tax purposes, plus giving financial assistance to their children.

“Clients feel that they would rather give money away during their lifetime rather than pay inheritance on their estates on death,” explains Rowena Griffiths, chartered financial planner at Female Financial Management.

She notes the most common lifetime gift is for parents or grandparents to help younger generations up on to the housing ladder, with five or even six-figure sums necessary for a deposit.

We are family

The Bank of Mum and Dad has received plenty of column inches, but intermediaries stress that parents and grandparents should also be focusing on their own objectives.

For those happy to distribute wealth while still living, a chief concern is that the gifted sum may not be spent or invested in the most effective way. This could mean either funds are squandered on something other than increasing financial security, or even lost in divorce. Many parents are apprehensive for such reasons, although concerns about the former generally dissipates once the children are older.

“With a number of marriages ending in divorce, parents often want to look at ways of ensuring the gift follows the [family line],” Ms Griffiths adds.

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