Baby Boomers have accumulated significant amounts of wealth throughout their lives.
Meanwhile, younger generations are facing financial pressures and difficulties like never before.
Do you understand the differences between the generations?
As a financial adviser, your clients probably fall into the former camp rather than the latter. To make the most of the intergenerational wealth transfer opportunity, understanding the differences between the generations is important. For example, did you know that 3 in 10 people aged between 55 and 64 have wealth in of £1m or more? This is in contrast to 25 to 34-year olds where 8 out of 10 have wealth of £85k or less.
To understand more about the differences between the generations click here for a helpful guide by Quilter.
Due to the pressures and difficulties faced by the younger generations, there is a growing awareness with your Baby Boomer clients of the importance of family wealth transfer.
Traditionally, most wealth transfers have taken place upon death. In recent decades this approach has waned. Now, greater levels of wealth are being passed on before death. The motivation for this can be either to:
- encourage or gradually prepare the younger generations by giving them limited amounts of wealth to oversee, or;
- for practical, logistical or tax-planning reasons.
With that in mind, how can you identify within your client population, those clients who could potentially afford to make gifts today - while still maintaining their living standards and protecting them against future events?
Do you have clients with £500,000 or more of wealth?
To help you focus your time with the right clients and trigger the right conversations, it's useful to review your client bank with a rule of thumb. A threshold of £500,000 of wealth can be a good place to begin. These will more than likely be baby boomers, born between 1946 - 1964.
To understand more about working out if someone can afford to make gifts during their lifetime click here for a helpful guide by Quilter. This can help you identify clients who should be introducing you to their family.
Ask clients about the financial pressures of younger family members
This is your opportunity to encourage your clients to introduce you to their family and begin the planning process.
Maybe the client has adult children who are struggling to save for a deposit to buy their first home, or for those adults a little older, a shortfall in their retirement provision. Or perhaps they have grandchildren who are entering the world of work after University with a large amount of student debt.
Having these conversations with the above clients is the first step in helping to explain to them the positive impact intergenerational wealth planning can have on their families - of which a gifting strategy may be an ideal solution.
Discuss the best gifting approach
Trust is key when these gifting discussions start, and you need to offer your clients and their family a simple first step to begin the process.
Avoid substantial one-off gifts
- At this early stage, avoid recommending that your clients pass on substantial wealth as a lump sum.
- They may find it uncomfortable to relinquish control of such a large amount of money and they could lose their trust in you.
Encourage small regular gifts
- Begin by recommending modest, regular gifts to meet the long-term financial needs of Generation X and Millennials.
Gifting to younger generations can take many forms - cash is the most likely, but ISAs and pension contributions should also be considered depending on the individual circumstances of that client's family.
Are you looking for a reminder about the IHT exemptions and reliefs about gifting? Click here to see Quilter's technical help.
The Quilter solution
Quilter is the new name for Old Mutual Wealth.
Since 1979, we've been supporting financial advice professionals like you.
This year we have invested significantly into our platform upgrade, to help you build more valuable relationships - moving forward together. A key part of the improvements has been to make it easier for advisers to incorporate true intergenerational planning with a full range of age specific ISAs and other products and better value for clients with family linking of accounts.
Click here to find out more about our new platform and ongoing commitment to advisers just like you.
View Quilter's legals here
The value of your client's investments may fall as well as rise and they may not get back what they put in.
