What role will advisers play in Australia’s intergenerational wealth transfer?

Australia stands on the cusp of a massive intergenerational wealth transfer that could have enormous ramifications for the Australian economy, investment bond specialist Foresters Financial said in its latest white paper, The Great Wealth Transfer.

The white paper discussed the importance of estate planning to prepare for the event of a death and ensure a smooth wealth and asset transfer from the departed to beneficiaries.

Emma Sakellaris, Foresters Financial chief executive, said improving financial literacy of Australians as a whole and increased access to affordable financial advice will become increasingly important as the wealth transfer takes place.

“The scale of this wealth transfer exposes the stark reality that there is an urgent need for accessible financial planning and improved education to ensure all Australians can navigate this transition effectively,” she said.

“Proactive estate planning is key to safeguarding assets and preserving familial harmony and protection of generational legacies.”

In the report, Foresters noted the potential challenges that could arise due to a lack of financial literacy on the beneficiaries’ part and the importance of addressing it prior to receiving an inheritance.

“For many beneficiaries, this will expose a huge gap in their lack of knowledge about finance and investment. This is why it is critical that the older generation begin the education process now,” Foresters said.

In the report, financial advisory firm Findex listed its four essential steps to prepare beneficiaries for an inheritance. These included directing them to a trusted financial adviser, helping improve their financial literacy, setting expectations, and having an open conversation about their potential inheritance.

Although the report stressed the value of estate planning, it noted that issues may still arise related to inheritance, particularly as blended families become more commonplace.

“Estate planning can be complex and expensive, and, furthermore, both wills and trust structures are often contested,” Foresters said.

“Conflicts and disputes will eventuate, even with a carefully drafted will and meticulous estate planning. With many families now blended due to divorce and subsequent remarriage – with resulting second families – there is every likelihood of an escalating number of disputes over inheritances.”

Adding to this, Sakellaris said: “It will also bring inevitable challenges, particularly with the rise of blended families and inheritance disputes. Even in traditional family structures, complexities emerge, underscoring the need for careful planning and proactive solutions.”