Employing hybrid advice in intergenerational planning

Simon Binney, Business Development Director, Wealth Wizards

Using hybrid advice strategies financial advice firms can bring on and serve new clients across the age range, helping to grow and sustain their businesses going forward, says Simon Binney, Business Development Director, Wealth Wizards.

One of the growing topics of debate amongst financial advice firms is how to attract the clients of the future. In recent years the majority of advice firms have been enjoying a steady income from the baby boomer generation but, of course, no generation lasts forever and at some point, the wealth is going to be either spent or passed on. Estimates are that in the UK there is around £5.5trillion (some estimate much higher) due to be passed from the current older generation to the next and/or subsequent generations in the next thirty years.

The question is, will the wealth that is passed down continue to be managed by the firms who have served the older generation? It is to be hoped so but, of course, there are no guarantees.

Younger, more tech savvy generations have far more information and data at their fingertips than their parents and grandparents. They are likely to be more comfortable researching and making financial decisions using available technology than previous generations.

The large financial services companies have realised this and are moving into the market. We only have to mark the recent entries into the digital advice market from big name players such as J.P. Morgan (in its purchase of Nutmeg) and Vanguard bringing its successful US strategy to the UK to see how the market is moving.

These moves may also have been spurred on as a result of the pandemic, which would seem to have accelerated familiarity and comfort with digital finances and a realisation among a wider proportion of the population that they need to be planning their financial futures and they need some help in doing so.

The new paradigm is about capturing the clients who are on the first or second stages of their financial growth curve and the potential wealth inheritors of the future, and giving them the channels they need to manage their growing wealth in the way that they want. It’s winning the investors and savers who will be the wealth accumulators (and fee payers) over the next 30-40 years.

There is another side to this too, in that intergenerational wealth is not just about clients. Advice firms must have a clear long-term plan for growing and maintaining their business if they want to keep their younger advisers with the business. Why stay and work for a company that you can see will be losing older clients year on year and shedding its assets under management as younger generations take their money to other firms where they can get the options and choices that suit them?

Food for thought?

Threats and the opportunities

So, how should advice businesses be responding to the threats and the opportunities that this intergenerational wealth transition presents?

The good news is that, as mentioned, the uncertainty caused by the Covid-19 pandemic has brought home to more people the need to address their financial affairs and their financial future and boosted the reputation of financial advice firms. Demand for financial advice among the under-35s, for example has risen in the wake of the pandemic, with a recent survey by The Openwork Partnership showing that 23% of under 35’s say they would value financial advice going forward.

But they are going to want financial advice on their terms – and at a price they can afford.

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