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Advisers slow to address wealth transfer opportunity

Advisers slow to address wealth transfer opportunity

Advice firms have been urged to pick up the pace when targeting younger clients as research shows a mismatch between the “opportunity” advisers see in the incoming intergenerational wealth transfer and tangible steps taken to address it.

Research from Schroders, published today (November 19), showed that 78 per cent of financial advisers viewed the impact of wealth transfer between generations as an opportunity for their business.

Some 15 per cent saw the amount of wealth tipped to pass down from the ‘baby boomer’ generation as a threat, while just 7 per cent thought it would have no impact.

However there was a “mismatch” between the number of advisers spotting the opportunity and those making steps to target younger clients, the research showed.

Schroders polled 125 advisers earlier this month and found that only a third (33 per cent) of firms had a specific proposition for targeting the transfer of family wealth to the next generation, while a mere 21 per cent of firms had a differentiated sales and marketing strategy targeting young investors.

Gillian Hepburn, intermediary solutions director at Schroders, said: “There are a few things not tying up here, there’s a mismatch.

“Advisers think there are opportunities but are not addressing this. The average age of clients remains high, with just 9 per cent of advised clients sitting in between the ages of 20 and 50.”

Attracting new clients

The findings come against a backdrop of advisers facing challenges when attracting new clients.

After regulation and professional indemnity insurance, finding new clients was the third most common business concern with 45 per cent putting this in their top three concerns.

Ms Hepburn said: “At a time when financial advisers are reporting finding new clients as one of their main challenges, and with Covid-19 contributing to this, potentially some of these new clients are already within the next generation of their existing client bank.”

The research also showed that the number of advice firms accepting clients with assets of less than £50,000 had dropped from 52 per cent in 2019 to 43 per cent in 2020.

A high minimum assets requirement is often seen as a barrier to younger, and less affluent consumers, gaining access to advice.

Advisers were also urged to look at retaining, attracting and advising women — particularly divorced or widowed women — as a new avenue to gain clients.

According to Schroders, a recent US survey suggested that two thirds of ‘baby boomer’ wealth was currently held within couples, with the first point of wealth transfer typically from husband to wife.

But only 9 per cent of advisers polled by Schroders had a strategy for retaining, or attracting, the business of recently divorced or widowed women.

Ms Hepburn said: “Perhaps of greater concern should be divorced or widowed clients where less than 10 per cent of advisers have a differentiated proposition and there is the potential to lose assets as significant numbers of these women change their adviser at the points of wealth transfer.”

Advisers being urged to consider the changing demands from their clientele is nothing new, with Brooks Macdonald estimating that 300,000 people were set to inherit £327bn in the UK over the next ten years.