The great wealth shift

It is estimated that in the next thirty years, somewhere in the region of £5.5trn will be passed between generations in the UK.

There’s no doubt that what has been dubbed The Great Wealth Transfer between the baby boomer generation and their successors, will offer significant opportunities for financial and legal advisors alike.

The objective of capitalising on those opportunities will undoubtedly bring difficulties, through the dichotomy of maintaining trust in tradition while successfully attracting new generations.

There will be a growing ilk of target client, many of whom will not previously have had cause to seek financial advice, or perhaps not had the complexity of a financial estate for which they required legal advice.

The opportunities afforded by the anticipated wealth shift are not limited to straightforward financial planning.

They will span numerous private wealth related issues stemming from pursuits which often follow significant inheritance, including wealth protection, property development, business and entrepreneurial-related matters, and the related dispute resolution/litigious issues which often arise.

Research has indicated a degree of unpreparedness among the potential beneficiaries, an issue which may well be compounded by a corresponding lack of advance engagement from, and discussions with the benefactors.

Another pertinent consideration for advisors is the apparent desire for independence among the younger generations. Many have signposted that they often associate their parents’ chosen advisors with biased or outdated advice; or simply want to exercise more independent decision-making and self-education.

So there is not only the opportunity to capture a new generation, but also to capitalise on those who are looking elsewhere (away from existing family advisors) for their own independent advice.

The key to building a long lasting advisory relationship with the next generation is understanding their values and behaviours. Recent research into the investment behaviours of millennials shows that those who have children are “more likely than those without to invest in the next year… and appear to give greater consideration to the environmental and social impacts of their investments than those who are not parents”.

Such trends offer further opportunity to identify expanded or new services for private wealth advisors.

In addition, research has shown that among the affluent millennials generation, there is an irrefutable demand for technology in addition to the human element, with online/mobile investment platforms “the single most popular way of managing investable assets for affluent millennials”.

Financial planners and legal advisors will increasingly be faced with the challenge of ensuring they don’t alienate their existing client base by attempting to attract new prospects.

This can often lead to a mixed message; and worse – a lack of identity or direction for a business. Striking this balance will be imperative, particularly as research indicates that the majority of affluent millennials expect to pass on money to their family either on death or during their lifetime.

This shows the importance of embedding with future generations. Just because millennials like to shop around, and undertake self-study in the process of ensuring they get the best possible service, doesn’t mean once they find what they’re looking for, they’re any more likely to migrate again.

It is crucial to have a sound understanding of the objectives of those who are passing wealth on – and those who will be receiving it. The best advisors will encourage and foster open dialogue with transparent decision-making and be able to demonstrate an in-depth understanding of the overall objective, which instils trust in all the stakeholders involved.

The role of the trusted advisor will pervade but will, undoubtedly, look different. Despite this, the role will have the same foundations as always, but with a new layer of technological expectations, innovative solutions, social impact considerations.

There will also be more active involvement and direction from clients who are unwilling to be passive in relation to their personal and business financial interests.

The successful trusted advisors will be those who achieve the elusive balance between more traditional client service values and the demands of the modern consumer.

Pippa Allsop is an associate at Michelmores michelmores.com