Advisers on their role in intergenerational wealth transfers

By the time a client becomes elderly or passes on, it can be too late for an adviser to engage with those who will inherit their wealth as they are more likely to have found their own adviser, says Martin Brown, managing partner at Continuum.

“Our advisers regularly check in with their clients for family updates, and we have developed an interactive online family tree to help with these discussions. Any big change for a spouse or children can also mean that it would be appropriate to suggest making changes to the client’s financial plan. It is important not to get tunnel vision.”

If an existing relationship is not already in place, annual meetings are an opportune moment to forge relationships with a client’s close family, says Gemma Harle, managing director at Quilter Financial Planning.

“It is dangerous to assume that clients will automatically involve their advisers in intergenerational wealth transfers. So, it’s important to use annual reviews to create trust and be the go-to professional regarding this most intimate area of financial planning.

“We have encouraged advisers in our network to help identify the risks that the intergenerational wealth transfer might pose by providing a self-diagnostic exercise that helps reveal where more work might need to be done.”

This self-diagnostic exercise involves advisers analysing their top 10 clients by the value of wealth under management and annual fee income, and whether the adviser has a relationship with the client’s partner, parents, children and grandchildren.

A multi-adviser approach

But James Morrell, managing director at Rothschild & Co’s UK wealth management business, speaks of a different approach.

He says the business does not “artificially analyse” or segment clients’ data, or make assumptions based on a client’s age, gender or other demographics.

“As a business run by the seventh generation of the Rothschild family, taking a long-term perspective when we think about how we work with clients and invest on their behalf is very much in our DNA.

“Of course, it’s also much more challenging to recruit a new client than to retain an existing one, another reason why we focus on exceptional client service and ensuring that our clients have no reason to look elsewhere.”

Rather than focusing on a strategy for wealth retention, Morrell says the wealth manager plans for intergenerational wealth transfers by assembling client teams that work for the ‘wealth creator’ and succeeding generations.

“Our aim is that our teams reflect the diversity of our clients. No two clients are the same and, while you don’t necessarily have to put someone in front of the client who looks like them, it’s important to have a pool of people to draw from that can relate to clients on various levels – be that ethnic background, age, gender, interests or life experiences.

“The composition of each client team is reviewed internally every year so if, for example, the client is increasingly involving their children, we can adapt accordingly.”

With teams built around clients, Morrell says the client-to-adviser ratio is also intentionally kept low, so that advisers can get to know the client and their family well and anticipate their needs.

“We also ensure that our teams are as diverse as possible, with a balance of youth and experience. It is vital that the younger generation has someone in the team that they can identify with, and avoid feeling like they are ‘stuck’ with their parents’ adviser.”

An educational foundation

Advisers at Rothschild & Co will often also help to educate the adult children of clients, says Morrell, so they are prepared to handle their impending inheritance.

“We have facilitated small events covering family constitutions and made introductions to others who have navigated similar issues, including members of the Rothschild family.

“We have attended meetings where adult children have been told about their inheritance, taking the role of a friendly aunt or uncle in helping with spending plans – removing parents from difficult conversations, but giving both generations confidence.

“And we have conducted investment reviews without monetary figures, so the next generation can gain understanding without compromising privacy.”

David Batchelor, principal at Wills & Trusts Wealth Management, adopts a similar approach. His business runs an annual series of workshops for clients’ children on ‘how to inherit’ and what preparation they need to do when their parents pass.

“Our experience is that when clients pass away, we virtually are always involved in at least the probate work, but more often than not we’ll end up working with the children because we already have an existing relationship with them.

“For a firm or an adviser to build that relationship, they have to involve the children in estate planning. There’s no point in just doing an estate plan with the parents, and then hoping that the information will pass correctly down to the children.

“It’s always been my practice, wherever possible, to involve children in that planning, so they understand what’s involved.”

Chloe Cheung is a features writer at FTAdviser