Investing in the age of AI

The great wealth transfer – the opportunity is now! As trillions in wealth shift across generations, financial advisers face both risks and opportunities. Justine Randall, Chief Commercial Officer at Tatton, examines how firms can strengthen client relationships and adapt to changing expectations.

Intergenerational wealth planning has been a hot topic in the advice space for some time – let’s consider the opportunities and risks facing advisers from the greatest wealth transfer in history.

This ‘great wealth transfer’ is happening now as trillions in wealth is passing down from baby boomers to millennials. This has forced many advisers to think about their client bank, and the longevity of their relationship with them.

One in three (29%) advisers cited client longevity, or an ageing client base as their biggest concern in relation to their advice business, according to a recent report from AKG in association with Charles Stanley and Canada Life.

In the same report, advisers said intergenerational business and multi-generational business (servicing clients’ extended family members) as the most promising development opportunity in the market.

A relatively low hanging fruit for advisory firms who can put a well-structured wealth transfer strategy in place. But where to start?

Understanding the problem

Advisers spend their entire careers building up a client bank and a wealth of client assets. However if plans are not in place to build a relationship with their inheritors, we risk seeing the assets go elsewhere.

The problem facing advisers is the feasibility of extending their services to clients’ family members. They are (often) younger, so typically they have less current wealth, and therefore do not qualify for advice and fall into the advice gap.

This makes it difficult for advisers to establish a relationship and build rapport with their successors.

A recent report from Scottish Widows said when it comes to clients’ grandchildren, only 12% of advisers said they have established a relationship with them.

We should also consider client spouse engagement and longevity - we know women tend to live longer than men. This means women will be controlling the lion’s share of wealth before the intergenerational transfer takes place and yet these potential future clients are often disengaged from the planning conversation.

Building on existing client relationships

Two in five advisers (40%) listed marketing costs, or issues attracting new clients as their biggest concern about the current advice market. Directing more energy and resource into securing the longevity of existing client relationships could help to address this concern.

Intergenerational planning is a “win-win” for clients and advisers with clients able to maximise the tax-efficient accumulation of wealth, while minimising the tax on funds withdrawn and transferred.

This could lead to better client outcomes as families are planning on passing their wealth in a tax efficient way. But it’s also good business as advisers retain their client base and build trust through generations.

Developing advice firms’ proposition

The next generation of wealth owners are going to be vastly different to their predecessors. Growing up in a digital world, with smart phones and managing their money via online banking and apps, means their expectations on how they would like to communicate with advisers will be much different.

Firms will need to adapt their proposition to cater for millennials or risk getting left behind and at the same time develop their investment solutions to offer a flexible and holistic range of investments to suit multiple generations. This can be achieved by offering a discretionary fund management (DFM) service through a third-party – helping advisers to adopt a hybrid offering with, multi-asset funds or model portfolios suited to younger generations in the accumulation phase of their life stage and then moving to tailored models or fully bespoke portfolios as clients mature and their needs evolve.

Outsourcing investment management gives back time to advisers to focus on what they do best – driving engagement, building deeper relationships, and ensuring they maintain their client bank through the intergenerational wealth transfer

Get in touch:

www.tattoninvestments.com
enquiries@tattonim.com

About Tatton:

Tatton Investment Management is a ground-breaking investment manager offering market-leading managed portfolio services on platform, that helped change the landscape of investing for the clients of IFAs.

Champions of the IFA, we created a new benchmark for fees and, with our commitment to transparency, allowed advisers and their clients to understand what they are actually paying their investment managers to do.

We have proven that using a professional investment management firm does not need to be difficult or expensive, and by only working with IFAs we know the decisions we make are in harmony with the long-term goals and financial plans that investors have agreed with their own trusted adviser.

Proudly managing £21.8 billion of client assets for over 1,100 financial advice firms we have won numerous awards such as Best Discretionary Fund Manager, Best Investment Service Provider and Best Outsourced Investment Management through the votes of Financial Advisers and Paraplanners, the greatest endorsement of our approach