Covid the catalyst as more of us seek financial advice – Birmingham Post article 08.04.2021

The Covid pandemic has spawned a surge in numbers seeking financial advice.

According to a report from the Prudential, it has been younger generations to the fore, often made nervous by volatility.

Fifty-three per cent of those spoken to had either seen an adviser or were planning to, with Gen Z (18-22 year olds) and Millennials (23-38 year olds), leading the way – 58 per cent and 74 per cent respectively, driven by ‘getting into financial difficulty’ and ‘wanting to start their investment journey’.

This contrasts with 32 per cent of Gen X (39-54 year olds), 21 per cent of Baby Boomers (55-74 year olds) and 24 per cent of the 75+, the latter two groups perhaps satisfied key financial fundamentals are already in place or simply more sanguine, having lived through past financial crises.

It all comes at a time when we are about to see the biggest transfer of personal wealth in history.

Baby Boomers, who have benefitted from rising property prices, generous pensions and stock market growth, will be passing this on to their children, an estimated £5.5 trillion over the period 2020-2047.

Which poses the question – how prepared are families to cope?

In our experience at Eastcote Wealth Management, many of the affluent older generation have profited from good financial advice whereas their children generally haven’t. Indeed, I would go as far as to say they tend not to know their parents’ financial advisers or even what advisers do.

Hopefully, the pandemic, so dreadful in terms of loss of life, is the catalyst for helping them get their act together.

Unfortunately, says the Prudential, HM Revenue & Customs can expect a windfall because to date too many families have failed to put financial planning in place.

“While financial advisers are undoubtedly one of the best qualified professions to help clients navigate the complexities of trusts, gifts and intergenerational planning, HMRC IHT receipts show some families are simply not seeking advice, to their and future generations’ cost.

“The older generation are missing significant opportunities to help the generations that follow through methodical IHT planning, while also improving their own tax position.”

Why then do many leave in-life wealth transfer so late?

Prudential continues: “The most common concern was ‘I might need it myself in the future’, felt by 29 per cent of those interviewed, understandable perhaps given increasing life expectancy and the cost of care; ‘squandering’ was second (25 per cent), a concern that generations to come might fritter away the older generation’s hard-earned savings; ‘lack of control over their spending’, echoing ‘squandering’, in many ways older generations are looking for ways to direct how younger generations put assets to constructive use (22 per cent); ‘they should make their own way in the world’, a surprisingly high 1 in 5 people (rising to 29 per cent of grandparents) believes independence is an important life lesson, at least in the early years; and 19 per cent were concerned ‘recipients would need to pay tax’ on any in-life gifts.”

Yet, even if some are unsure as to the tax implications, an area where financial advice can be particularly beneficial, the good news is that gifting, the Bank of Mum and Dad, is alive and well.

Asked what financial gifts people had received from their parents, the most common was money towards bills, rent or mortgage (21 per cent); 18 per cent in finding a deposit; 17 per cent help with their career (internships/qualifications); and 16 per cent school or university costs, rising to 24 per cent for Gen Z and 20 per cent for Millennials.

Something of a wake-up call.