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How wealth firms can tackle the next-gen client conundrum

Substantial business could walk out of the door if relationships are not built early enough


The wealth management industry has been repeatedly warned that is it not doing enough to reach out to the next generation.

With staggering sums of money being passed down, inheritors hold the power when it comes to deciding who will support and advise them.

But firms are not helpless in this situation and can improve the odds of keeping the client (and assets) if they actually have a strategy to engage with beneficiaries.

International Adviser spoke to Dean Moore, managing director and head of wealth planning at RBC Wealth Management in the UK, about inheritance, taboo topics and potential IHT changes.

Moving on?

Moore said: “I think the challenge for wealth managers, certainly in terms of asset wealth policies, is that if most beneficiaries don’t have an existing relationship, they are likely to go elsewhere to seek advice.

“There’s a vested interest to make sure we engage with future generations, but also helping clients have those conversations.

“I don’t think organisations have historically engaged at all in a meaningful way with future generations. We are now seeing an increase in conversations about that and setting up propositions that can cater to those younger members.

“Whilst they’re younger, they can be looked after with a relatively light touch and solutions and services that are going to be appropriate for them now, before they’ve inherited in the future.”

Realising mortality

Inheritance is still a taboo area. Many next gen clients might be hard to engage because their parents or grandparents do not speak about their wishes and plans.

IA recently spoke to Zedra director Sue Wakefield, who said “however much I encourage families to talk about inheritance, it’s still not happening enough”.

But RBC’s Moore believes that the pandemic has changed the mentality of clients.

“We’ve seen an acceleration in decision making, whether that be making gifts sooner, establishing trusts, etc.

“I think it’s also freed up clients who typically spend a lot of time traveling internationally and running businesses. People have suddenly got bandwidth to think about their personal finances.”

Big issue for estate planning

Once inheritance and estates are discussed, it frees wealth managers and advisers to start looking at estate planning and IHT mitigation strategies.

But Moore thinks inheritance tax may be looked at by the UK government to pay for the costs of the pandemic.

“The money’s got to come from somewhere to pay for the £300bn ($413bn, €352bn) covid bill. If it’s not going to come from income tax, national insurance or VAT, capital gains tax might raise a little bit of money, but it’s probably not a significant amount.

“We could see pension tax relief changes, but it might be inheritance tax and wealth transfers, given the amount of money that’s going to transfer between generations over the next 10 years.

“It is a challenging role for the government to look at IHT, but it really has to be something which is going to be considered in terms of the covid black hole. For me, it’s more about acting sooner rather than later.”

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