‘The need for a robust advice strategy remains’

Roger Brosch

Is the Great Wealth Transfer more of a Natural Progression? Roger Brosch shares his thoughts on the topic…

I have the niggling suspicion that the urgency in the Great Wealth Transfer debate is largely being manufactured by product providers. There has been some impressive provider-led PR holding our attention. Some of the arithmetic, however, has been decidedly less impressive.

On the surface, the wealth being transferred from the Baby Boomer generation is indeed great. The figure for the UK alone has been touted by 2050 to be in the region of around £7trn.

However, since the term was first coined, I would put, well, money on the majority of those transfers most accurately being described as a ‘diffusion’ of wealth – a large, single source of wealth spread across multiple individuals across multiple, ever-expanding generations. If a family has two children who will inherit, and they each have two children, that single source of wealth starts to look quite stretched.

With each additional division, the strength of the original source weakens and it runs the risk of being diluted to the point of being practically homeopathic!

Overlay the impact of property price increases and the money being bequeathed has to work very hard indeed just to maintain a good standard of living, let alone to continue to generate what could be described as wealth for each of the beneficiaries.

In short, it won’t remain ‘great wealth’ if there are a large number of beneficiaries.

I’ve been reminded of the scale of the impact of property price increases recently. A family member of mine bought a lovely big house in Wimbledon village for £80,000 in 1980. He sold it a number of years later for £800,000. I saw the other day that the house just sold for £8m.

We all say that property prices can’t carry on the way they have, but they consistently do. So what does that mean for my relation’s great-grandchildren – will they have to fork out £80m for a similar house when the time comes?

‘Advice on offer has to be relevant and visible’

Even with a transfer that is more a natural progression rather than the phenomenon it is being made out to be, the need for a robust advice strategy remains. And the advice on offer has to be relevant and visible to the generations that are going to benefit from the transfer of wealth. The advice needs to feel like it is for them and about them. And siloed advice models that focus exclusively on high net worth needs won’t cut it. Initially, at least.

If advisers are to retain the great wealth transfer beneficiaries as clients, they could do worse than embrace a laterally integrated advice model.

A lateral integration of corporate workplace, private wealth, investment, and digital financial services removes the friction siloed models unintentionally create. Frictionless movement between different advice needs is what’s needed. But it’s a need that is going largely unmet.

The channel through which an individual first accesses professional advice or guidance should provide a gateway to accessing the other channels, as their advice needs change. Someone already engaged with your brand through their workplace has a direct line into the other types of advice they may need when they inherit.

Good advice is, and always will be, about the individual.

If the client’s partner or their child walk when the wealth is transferred either they don’t have a relationship with the brand at all or they don’t feel that they are understood by the brand. The statistics on the number of wives or children who jettison the husband/parent’s financial adviser when the wealth has transferred should shake the whole profession into action.

Like a lot of these things, they start as a bit of noise that feels rather hollow yet build into something real. It’s rarely as big a concern as people want us to believe.

However, there is no doubt that there is momentum building slowly behind the noise of the Great Wealth Transfer – it’s just that it’s not for the reasons the term was first coined.

The mood music has changed as government legislation threatens to pull the rug out from under the last ten years’ worth of wealth transfer planning.

The plan to bring pensions into the inheritance tax regime from April 2027 has forced a major rethink.

Any talk of the Great Wealth Transfer from here on in needs to be about protection and ensuring we address the prevalence of risk aversion. Whatever the sums transferred in the end, they are going to have to work extremely hard.

Roger Brosch is chief executive at Foster Denovo Group