The great wealth transfer

As the UK prepares for £1.2tn to pass from older to younger generations over the next 30 years, financial planners should start thinking about how they can best support the heirs to this wealth. Amyr Rocha-Lima MCSI, financial planner at Holland Hahn and Wills LLP, and member of the CISI’s Financial Planning Forum Committee, reports


A July 2018 report by wealth manager Sanlam UK, entitled The generation game, indicates that more than 11 million 25- to 45-year-olds in the UK are expected to receive an inheritance from their parents or grandparents within the next 30 years; 5.1 million of these individuals expect to inherit £50,000 or more in fixed assets or cash. However, they might be banking on this windfall a little too heavily.

The report notes that four in ten of the under-45s surveyed are anticipating an inheritance, but have not yet discussed the specifics with the gifting party, and a third admit that they are delaying saving in anticipation of their inheritance. There’s a strong case here for professional financial guidance but many likely won’t seek it, or will hold off on doing so. Research released by insurer Prudential in August 2018 finds that just 26% of millennials see a financial adviser regularly.

But at least 56% of UK millennials (born between 1980 and 2000) have started saving for retirement, according to recent YouGov research. However, they appear reluctant to actually invest their savings, opting instead to hold cash or cash alternatives. This doesn’t bode particularly well for their nest egg; it indicates they’re shying away from the historically higher returns investments yield over the long term and effectively wasting the compounding advantage enjoyed by those who start retirement planning earlier in life. 

According to a 2015 press release from – regarding its report titled Value of advice – the optimal age to receive financial advice regarding retirement is 25 – but most tend to delay this conversation for a further ten years. The study indicates that those who consult with a financial planner early in their careers tend to save more and have more realistic expectations of how long their retirement years will last. Furthermore, individuals who work with a financial professional can help to safeguard against some of the mistakes committed by DIY investors: from buying expensive products to overpaying on their taxes or obsessing over short-term performance.

The need for professional financial guidance was further underscored by a study on levels of financial literacy, released in March 2018 by UCL and the University of Cambridge, that finds adults in England and Northern Ireland perform worse on basic financial literacy tasks than their counterparts in most other developed countries – even when provided with the opportunity to use a calculator. 

As the UK prepares for this unprecedented intergenerational wealth transfer – estimated to be worth up to £1.2tn over the next 30 years – there is a compelling opportunity to serve younger clients and help them prepare for financial security. The question is, what can financial planners do today to bring their clients’ children and grandchildren into the fold?
What millennials wantIt’s no secret that millennials are, for the most part, more tech-oriented than generations past. The advent of smartphones has facilitated a shift in how younger generations engage with financial services – 46% of UK millennials are keen to use their mobile phones to conduct all their financial planning, according to the 2018 Legg Mason global investment survey – and this is something that financial planners should consider. Those without a mobile-optimised website, for example, can expect eye rolls at best. Millennials crave convenience and demand always-on access, and that’s a reality financial planners need to plan for as they tailor their service proposition.

That said, this devotion to smartphones doesn’t mean that younger adults don’t value the human touch, or that they overlook the power of a financial planner’s expertise. In fact, a significant majority of respondents in the Legg Mason survey select their preferred mode of advice as ‘online with the option of face-to-face’. It also suggests that online-only options are appealing to just 12% of millennial respondents.

Five questions to kick-start your conversation with clients about wealth transfer

1. What was the key to your success in creating wealth and how might telling this story to the future generations be helpful?

2. What are your major concerns when deciding to give wealth during your lifetime versus through your will?

3. If you have multiple beneficiaries, what would be a fair distribution among your heirs?

4. Are you concerned that your heirs may lack the skills to manage wealth?

5. Outside of the executors of your will, who should know what about your wishes and intentions?
However, cost (or perceived cost) deters many young adults from seeking financial advice. When quizzed by Dabbl – an online share trading platform – about their attitudes towards investing, 62% of millennials claim that their reticence to establish an investment portfolio is driven by a belief that investing is solely the domain of the wealthy. 

The Dabbl survey also shows that almost three-quarters (72%) of the 2,002 respondents aged 25 to 34 have eschewed investing because they think it is too complicated. This is where robo-advisers like Stash have excelled, producing educational content that is easily digestible and comprehensible to the average investing novice, breaking down key financial concepts in a non-judgemental tone. Financial planners could benefit from taking a leaf out of their book and drafting informative blogs and email content to market their expertise – whether it’s a post explaining market volatility, or a quick blog decoding cryptocurrencies, it will elevate their profile and build trust in their ability to help clients navigate key areas of interest.

It’s also worth keeping up to date on environmental, social and governance trends. Though millennials are seeking returns, they are concerned with ethical factors. But 29% of investors say a lack of information regarding sustainable investments prevents them from investing more in these assets, says Legg Mason. 

Social media is a useful platform for engaging with, and providing value to, existing and prospective clients – by posting informative content and showcasing results achieved for similar customers (with their permission, of course). 
Models and pricingThis confluence of factors – the appetite for expert input, affinity for mobile-centric communication and desire for affordability – highlights a need for financial planners to be creative with their pricing to capture the next generation of clients. Younger financial planners already have their fingers on the pulse of their peers’ needs and are increasingly serving them via a fee-for-service model. In his article ‘How to profitably price fee-for-service financial planning’, Alan Moore CFP®, co-founder of the XY Planning Network, says 62% of millennial advisers are using this model.

Financial planners may wish to consider implementing a tiered/hybrid offering that empowers the client while giving them a ‘safety net’ of sorts. Such a model may allow clients to interact with their portfolio via an online portal yet also speak with a human (for example, via webchat, video conferencing, text or email), if they need a ‘gut check’ regarding certain decisions. As they accumulate wealth, or approach a major life event, clients can opt to move up to the next tier or purchase an additional service for a set price.Starting the conversationFinancial planners can start the conversation by speaking to the donors – their clients – asking if they’ve had a candid conversation with their heirs about the inheritance process and if they feel well equipped to manage their finances responsibly. Millennials are more likely to seek advice from their parents than prior generations. Suggest to the clients that they invite their designated beneficiary (or beneficiaries) to the next scheduled meeting for an informal, no obligation consultation where some of the key considerations for both parties can be broken down. The inheritance discussion needn’t include actual figures, but it’s important that all parties are clear about what’s involved – whether it’s distribution of property or assuming responsibility for the family business. These candid conversations can minimise the likelihood of conflict later on.

These meetings also represent a vital step in developing a relationship with the next generation, presenting an opportunity for you to learn more about them and their priorities. This includes some of the key life events, from family planning to home-buying, around which they could benefit from professional financial advice. Furthermore, the Sanlam report suggests clients will appreciate efforts to engage their progenies: two-thirds (61%) of over-55s surveyed don’t think younger generations are receiving adequate financial advice and 40% are concerned about how they will use their inheritance. The majority (59%) want their children to see a financial planner – but just one in ten have suggested it.

Though some clients might be uncomfortable broaching end-of-life conversations, you can help them to take a rational and considered approach that offers them peace of mind while minimising the risk of family conflict. This might involve outlining your client’s key legacy priorities, ensuring that their offspring are primed regarding financial literacy basics, helping them to create a comprehensive inventory of their noteworthy possessions, assigning beneficiaries for insurance policies and investment accounts, creating trusts that encourage responsible financial decision-making, and more.

Inheritance or no inheritance, stagnant wage growth, burgeoning student debt and rising inflation have created challenging economic circumstances for many young adults, who’ll likely need to save more than their parents did to enjoy a comfortable life in retirement. As a profession, we need to adopt a nimbler approach that enables us to serve these next-generation clients in a way that resonates, meets their needs and augments the likelihood of a bilaterally beneficial engagement.   

This article was originally published in the Q1 2019 print edition of The Review. All members, excluding student members, are eligible to receive the quarterly print edition of the magazine. Members can opt in to receive the print edition by logging in to MyCISI, clicking on My account, then clicking the Communications tab and selecting ‘Yes’.

Once you have read the print edition, keep coming back to the digital edition of The Review, which is updated regularly with news, features and comment about the Institute and the financial services sector.

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Published: 03 May 2019
  • Financial Planning
  • The Review
  • financial literacy
  • advice
  • financial planning
  • millennials

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