Matt Ward reflects on the recent AKG briefing exploring the potential for intermediary firms to develop intergenerational planning opportunities
AKG’s latest industry research project and the resultant briefing – Advancing Intergenerational Planning Opportunities – sought to specifically explore the potential for intermediary firms to further develop intergenerational planning opportunities with clients and their families. In doing so, the overarching aim of this briefing was to provide readers with an understanding of:
- The nature, scope and potential of the opportunity for intergenerational advice and planning services.
- The drivers for demand and growth.
- The potential barriers to engagement, development and the associated issues raised.
- The processes, skills and approaches required for success.
- Where intergenerational planning will fit in the advice landscape of the future.
In any such project it is important to gather sentiment and develop understanding from the key stakeholders in the relevant market and in the case of intergenerational planning it is primarily with consumers (clients) and advisers, ably supported by providers and other professional services.
AKG’s briefing, sponsored by Canada Life and Charles Stanley and available to download at https://www.akg.co.uk/downloads, was therefore crucially informed and underpinned by findings from three separate but complementary market research exercises involving both consumer and adviser audiences/respondents.
Key Takeaways
In this feature for PFS members we take a canter through the Executive Summary points emerging from AKG’s briefing.
- Covid-19 has worked as an accelerant for the development of intergenerational planning opportunities given in part that families have been thrust together to discuss some very difficult issues in the past 12 to 18 months. The growing use of online meeting technology, in addition to creating time efficiencies in intermediary firms for enhanced client focus, has also meant that family unit discussions can be far more easily facilitated.
- Expansion of the advisory relationship beyond the traditional focus of the primary client to the spouse/partner and to other members of the family unit is a prerequisite for those wishing to advance intergenerational planning opportunities.
- Intergenerational planning will require shifts in mindset and traditional servicing approaches for many advisers and primary clients. Reticence to move forward on this broader/deeper relationship basis, on the part of both clients and advisers, is the most commonly mentioned barrier to progress. Client reticence is often founded on reluctance to share too much information about plans. Adviser reticence may be founded on reluctance to disturb the relationship, but it may also be based on a lack of confidence in probing further and for advisers who are less specialist in this area it may indicate a need for more knowledge, technical understanding or better resources to enable development.
- The development of training and compliance modules within firms which support and enhance the ability of the adviser to address and tackle the two core issues of vulnerable clients and family disputes will be vital. Similarly aligned processes which continue to maintain best practice and ensure the recording of all interaction and issues will be needed to provide solid audit trails.
- There is also a requirement for development of empathic relationship and soft questioning skills, and a need to broaden factfinding to bring family hierarchy, goals and issues into play.
- Forging relationships with other professional services will be a key requirement for those firms seeking to present more coherent and comprehensive intergenerational planning services.
- There is also a defensive requirement for some firms to develop intergenerational planning services to preserve assets under management by ensuring that assets don’t haemorrhage on the death of the primary client.
- There is pressure on the advice industry and advice firms to showcase the value of advice. The multitude of ways in which firms can support clients and family units with vital organisational and planning items presents a great opportunity to further the case about the value of advice.
- Where there is opportunity there is always a requirement for better education and understanding. History shows that the weight of educational material production typically falls on providers of solutions and so this will again be an area where providers pick up the baton and continue to play a key role in terms of helping intermediary firms to advance intergenerational opportunities with clients.
- For many advisers and their clients with relatively limited needs, the benchmark should be to support minimisation of inheritance tax exposure and orderly transfer of wealth on death. This may be all that is needed but it is still a valuable service to deliver and cannot be done without good technical knowledge and good relationship skills.
- Looking at gifting behaviours it would appear that these are quite regular occurrences in the UK, for a variety of reasons, and they may not always form part of a formal planning strategy. There is an opportunity for intermediary firms to help clients better organise and structure these, i.e. timing and source of payments, to ensure that no nasty additional costs/taxes are incurred in the family chain.
- Whilst the focus has inevitably been on servicing baby boomers since the introduction of pension freedoms and continues to be so as the profession follows them through retirement and into later life, there comes a requirement to look beyond this generation for future business opportunities. Ensuring that planning dialogue is started earlier in future is a requirement and then seeking to understand beliefs and needs of other, younger generations.
- Even at a high-level the contrasting thoughts and themes from under-40s provide a good insight into the potential generational divide and hence provide further perspective for those servicing clients from an intergenerational planning perspective and those seeking to identify and work with the clients of the future. There may well be warmth here for working as a family unit when it comes to planning, either with their parents (looking upstream) or involving their offspring (looking downstream).
- Discussion and debate around the recently introduced Health and Social Care Levy will have brought care/later life planning requirements and intergenerational differences into even sharper focus.
Ultimately there is no right or wrong answer here. Intergenerational planning as a strategic business aim is not for all intermediary firms. Much depends on the focus of the business, the approach of the adviser(s), the demographics of the client base, the business mix and views on future direction. But while it may not be for everyone all firms should ensure that they have made themselves fully aware of the opportunities available.
Matt Ward is communications director of AKG Financial Analytics