The largest intergenerational wealth transfer in history is a major opportunity for financial advisers, provided they have invested in the children of their clients.
An estimated $3.5 trillion will be transferred in the next 20 years from Baby Boomers – a generation also known as an ‘economic miracle’ – to their children.
However, it is typical for a client’s children to seek out a different adviser to their parents. Particularly if that child has no relationship with their parents’ adviser.
But what if they did? What if financial advisers had a relationship with the children of their clients, well before they actually needed financial advice or received an inheritance?
During the ifa Advice Practice of 2020 Roundtable, partnered by Iress, Integral Private Wealth founder and financial adviser David Simon explained that the majority of his clients have children. The practice promotes its app and digital content to the children of clients for no additional charge.
“We give them access to the full premium products and we do work experience programs for of our clients’ children,” Mr Simon explained.
“We recognised the importance of that about three years ago. I picked up a few clients through the children of clients I was working with. Even better, I got the parents to agree to pay for the advice. The kids were happy and the parents also felt like they were doing something.”
Investment Trends CEO Michael Blomfield said the financial system, largely driven by superannuation, has been set up for the accumulation phase and that most of the financial advice being offered in Australia today is actually retirement advice. Few advisers have developed an adequate service offering for those in their 20s, 30s or 40s.
“Right up until their mid-30s Aussies are paying for education or saving for a house. At around 42, research shows they start to consider life insurance. Most Aussies start planning for retirement at 54,” he said, adding that massive household income to house price ratios are adding pressure on younger Aussies.
The pressure on younger Aussies has also shifted.
“Back in the early 1980s, it was typical that only one member of the household would work to support the family and pay the mortgage. Today, it’s usually both members of the household who will work and yet they still find it a struggle to buy a home,” Mr Blomfield said.
“For years there have been well in excess of a million people who want financial advice, intend to get financial advice and discover that the service model is not meeting their needs. They discover that whether they are 25 or 55.
“They want to build a relationship over time with an adviser who recognises that the main game when they are young is to buy a house and the main game when they are old is not to die poor. They want all of that done in a way that recognises that it is not a single individual who makes these decisions. It is a couple, it is a household, and it needs to be done in a way that is cost effective for them.”
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