The passing on of wealth down the generations is a complicated affair involving many considerations – it is a balancing act between the needs of the individual who holds the wealth and those of their offspring. It often involves multiple generations at once covering a wide range of demographics all with differing knowledge sets, different ideas on 'money' and all with different socio – economic backgrounds.
The scale of the issue is hard to overestimate – Sanlam Private Wealth Management and Investment Company recently estimated that the millennials expect to inherit £1.2tn from their elders over the next 30 years – a figure hard to grasp.
The bank of Mum and Dad (not forgetting Grandma and Grandpa) is still a major source of assistance with the most common lifetime gift being for a deposit to assist younger generations onto the housing ladder – gifts or loans from families accounted for 29% of First-Time Buyer deposits (Source ONS).
We believe families are more conscious of the increased role they may have to play in safeguarding their descendants’ financial futures. There can be the knock-on benefit of reducing their estates for inheritance tax as well as assisting their children. However, apprehension often arises about how the monies are utilised/spent? Will they be squandered or lost totally on divorce? Can the gift be protected so it follows the family line?
Without the comfort of Final Salary Pension Schemes anymore and the diminishing value and later payment of State Pension benefits in retirement relative to previous generations, there is more personal responsibility to plan for future financial stability. Despite the fact that financial education has been placed on the national curriculum, many young adults are hugely underprepared to make financial decisions and the complexity of financial products.
The 'advice gap' and access to financial advice is seen by the industry regulator, The Financial Conduct Authority (FCA) as a major concern and it remains high on their agenda and continues to consult with the industry to understand the changing financial needs across generations for UK financial services markets.
We believe that as Independent Financial Advisers, we can be best placed to open up discussions and planning and engage with the whole family not just the client. It can involve such matters as Trust Planning, Wills and Lasting Powers of Attorney, Long Term Care and Inheritance Tax Mitigation.
Should any of the above provoke thoughts about your own situation, please do not hesitate to contact Ethos Financial Solutions on 01302 244977.
Publish date: 7th August 2019