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Intergenerational wealth transfer: developing your business strategy

Don’t let your client’s beneficiaries walk off and make a mistake

As an adviser, you are a successful businessperson. Through many years of hard work and commercial acumen financial advisers have managed to significantly grow the amount of wealth they manage on behalf of their clients.

In the UK, this equates to £394 billon on platforms (Q1 2020 Langcat), with an annual revenue of £4.2 billion and yearly profits of £872 million*.

Globally, the total High Net Worth population has grown to 19.6 million and, with US$74 trillion of wealth**.

you've grown your business chart

The risk your business faces without an intergenerational wealth strategy

Those financial advice businesses who wish to remain valued need to have an intergenerational wealth business strategy. Without one, the death of your clients could kill your business. But this strategy should not simply be about long term wealth management to protect the current value of your clients. It is also a growth strategy.

Intergenerational wealth transfer is an opportunity to develop new relationships with clients or extend existing relationship within families  who entrust you to manage additional wealth on their behalf.

The risk your business faces without an intergenerational wealth business strategy

As you can see, all the hard work advisers have put in over the years to build up a business based on the value they’ve helped to add to their client is under threat. Without a trusted relationship with the next generation, they will take the inherited wealth elsewhere. You already have a good relationship with your clients and that could extend to their spouses. If you don’t have a relationship with their children or grandchildren all your hard work could be undone very quickly with little to no value remaining after they have died.

* PIMFA: The Financial Adviser Market in Numbers 2019

**Capgemini’s World Wealth Report 2020

Did you know...?

The inheritance market is colossal

In the UK, the inheritance opportunity is  nearly 3 times the size of the current advised platform market. Close to £1 trillion of intergenerational transfers are set to take place between 2017 and 2027. In the next 30 years, £5.5 trillion will pass between UK generations.

Passing on the pounds – The rise of the UK’s inheritance economy. Published May 2019. Author: Kings Court Trust

UK children are most likely to receive gifts

Over 3 in 4 Baby Boomers and Generation X would make gifts to their children. These children are highly likely to use a different adviser (over half of Generation X and Millennials use a different financial adviser to other family members) or have no financial adviser at all (over 3 in 4 Millennials have no financial adviser).

Wealth transfer consumer research commissioned by Quilter via YouGov in July 2020*

The wealth transfer is imminent

For High Net Worth Individuals, it’s estimated that more than US$15 trillion of wealth will be passed on to the next generations by 2030. In Asia, an estimate of US$2 trillion is expected to be happening now.

Capgemini’s World Wealth Report 2020

80%
of UK advisers do not have a relationship with their current clients’ beneficiaries, many of whom are millennials.
Robo Advice thematic research Published Jan 2020 GlobalData

As you can see, all the hard work advisers have put in over the years to build up a business is under threat of churn with the next generation taking the inherited wealth elsewhere. You already have a good relationship with your clients and that could extend to their spouses. If you don’t have a relationship with their children or grandchildren all your hard work could be undone very quickly with little to no value remaining after they have died.

Customer turnover can destroy business value

Published academic papers about business value have identified that:

  • Customer churn is a major value destroyer (PWC 2002). You need to predict and avert attrition of the ‘right customers’ – those that contribute most significantly to your business.
  • It can be up to ten times more expensive to win a customer than retain a customer – and the cost of bringing a new customer to the same level of profitability as the lost one is up to 16 times more. (Lindgreen et el 2000)

Assess the intergenerational risk your business faces today

Here’s a 10 minute exercise you can do on one side of paper which can highlight to you what intergenerational risks your business faces

Take our 10 minute exercise

Understanding the generations

See our guide to help you explain to your clients the impact their intergenerational wealth planning can have on their families.

Download our guide

Top Tip 1:

Build up trust with your client’s family when they are not vulnerable, so that they trust you when they are.

Over half of Generation X and more than two thirds of Millennials would consider using a financial adviser if one was recommended to them by another family member. It’s a good idea to establish a relationship with your client’s family as early as possible so they realise the value you can add and see you as a trusted. Then, when the inevitable time comes, you are able to support and advise them during their grief. Emotional times can lead to rash decisions – you need to be able to guide them around these pitfalls

Wealth transfer consumer research commissioned by Quilter via YouGov in July 2020*

Top tip 2:

Ensure family members are your clients as well to provide continuity of service.

On the death of your client your service contract will stop. With this wealth passing onto family members, putting new service contracts in place could be challenging given the emotion of the loss of a loved one. This situation could be even more challenging if you have no existing business relationship with the family.

If these family members are already clients of yours, you will already have a service contract in place. Therefore, this challenging situation can be avoided, and service disruption minimised.

Adding value with an intergenerational wealth strategy

Let us help you add real value to your clients with our practical tips and support material to broach the vital subject of the passing on wealth through the generations.

Read more

* About the research

The research was commissioned by Quilter and undertaken by YouGov Plc, an independent research agency. All figures, unless otherwise stated, are from YouGov Plc. The total sample size is 1,544 UK adults, comprised of 529 Baby Boomers, 501 Generation Xers and 514 Millennials. Fieldwork was undertaken between 07/07/2020 - 08/07/2020. The survey was carried out online. Download a summary of the research report.