More than half (59 per cent) of advisers are concerned they could lose business as wealth transfers between generations, according to the Schroders UK Financial Adviser Survey.
The survey, which was launched yesterday, revealed this was up from 54 per cent in May 2022.
It was completed by 439 advisers and conducted online between October 18 and November 8 2022.
Over the next 30 years, some £5.5tn is expected to be passed between the generations as baby boomers start dying off - a phenomenon which has been labelled as the greatest wealth transfer in UK history.
Gillian Hepburn, intermediary solutions director at Schroders, said: "We've been working with advisers who clearly think it's a huge opportunity for them, but it has also been quite frightening.
“Wealth transfer is not necessarily about sitting with your wealthier clients and IHT planning, it's about that engagement with the next generation who will take that money and do something else with it.”
The research found that for 46 per cent of advisers, the average age profile of their clients has increased over the past five years while just 11 per cent reporting a decrease.
However the age profile of clients remains largely unchanged from last year’s survey, with 68 per cent of advisers surveyed stating they have clients with an average age of 51 to 64.
“Advisers are still predominantly dealing with older, wealthier clients,” Hepburn said. “That's their sweet spot.
“So all those votes about targeting the next generation - we're not really seeing that coming through despite the fact that 26 per cent of advisers say they've a proposition for targeting and transfer both to the next generation.
“It kind of doesn't feel like it when you look at the timeline.”
The survey found that despite an increased industry focus on the risks and opportunities posed by intergenerational wealth transfer, the percentage of advisers with a differentiated strategy for younger investors or for retaining, attracting and advising women had reduced.
This challenge, particularly around attracting younger generations, is brought sharply into focus with the declining percentage of advisers who will accept new clients with less than £50,000.
The survey revealed only 32 per cent of advisers would take on clients with less than £50,000, down from 52 per cent in 2019.
Meanwhile, the percentage of advisers who will only accept new clients with more than £200,000 has risen to 17 per cent.
Hepburn added: “Directly engaging with clients at this time will perhaps also be helpful when developing strategies for advising the next generation, as this year’s survey has found the number of advisers who are concerned about losing assets as wealth transfers between generations has increased.
“However, despite the perceived opportunities of wealth transfer, there still appears to be a focus on older, wealthier clients.“
Elsewhere, the main business related concern for the largest number of advisers remained to regulation, followed by servicing their existing clients; succession planning and/or exit strategy; and finding new clients.
Only 18 per cent of advisers surveyed said they were fully prepared for the upcoming consumer duty regulation, with 6 per cent having not started to look at it yet.
Sustainability
The survey revealed 76 per cent of advisers were specifically considering sustainability and ESG factors as part of their fund selection process, an increase from 43 per cent polled in 2019.
This followed an increasing number of advisers’ clients who have begun to explicitly specify that their investments should reflect ESG factors.
It found that more than half (56 per cent) expected an investment manager to consider sustainability and ESG factors as part of investment decision making to minimise risk and maximise returns, with only 8 per cent of advisers prioritise maximising returns and minimising risks entirely over the sustainability of investments.
A further 51 per cent of advisers have also seen an increase in the number of clients asking for sustainable investment options over the past 12 months, down from 75 per cent in November 2021.
But despite this, 37 per cent of advisers did not think they received enough information to demonstrate investment managers which actively engage were driving change
Hepburn said: “This year’s survey finds that, despite clients’ interest in sustainable investment solutions, the number of advisers who feel confident about discussing this topic with clients has reduced.”
Doug Abbott, head of UK intermediary at Schroders, said: “The findings of Schroders UK Financial Adviser Survey are in many ways unsurprising. Following many months of market uncertainty as a result of global and domestic factors, clients have become even more bearish than we saw in previous iterations of this survey.
“Interestingly advisers are anticipating inflation and interest rates to reduce in the future and expect to see their cash and government bond allocations come down in favour of equities over the next 12 months.”
He added: “What is however positive to note is that despite market headwinds, clients appetite for sustainable investment opportunities remains strong, with 89 per cent of advisers reporting that they think events over the past two years have reinforced the importance of stewardship and using an asset manager who actively engages with company management.”
sonia.rach@ft.com
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