IT will likely be no surprise to read that a significant transfer of wealth is underway in Ireland and beyond. All across the developed world, the coming years will see trillions’ worth of investment and housing wealth move, primarily from the baby boomer generation to their children. This transfer of family wealth between generations will be a defining trend for the decades ahead.
When it comes to providing clients with financial advice, conversations involving two or even three generations can be extremely complex. More ‘sensitive’ areas of discussion such as the provision of long-term care, enduring power of attorney and legacy giving need to be explored. Two generations may also have completely different views as to how assets should be invested. A younger client may want to invest to grow the assets, while the older generation might place more emphasis on protecting the wealth they have spent a lifetime accumulating.
Increasingly, investors are also becoming more conscious of ESG investment screening – a means of measuring the environmental and social impact of the investment of their assets. The plan for the transfer of assets itself will sometimes therefore involve an associated restructuring of an investment portfolio to reflect a stronger focus on ESG investments, for example exposure to renewable energy, or equities within dedicated ESG investment funds.
Preferences as to how to engage with financial planning or investment advice can often vary also. At the risk of generalisation, younger clients may place more emphasis on being able to access advice and information online or through other digital channels; while older clients may prefer a more traditional, face-to-face relationship with their advisors.
So, as client seeking advice in passing on wealth, how might you begin the conversation? Firstly, take the time to fully understand and document your own priorities. This may or may not involve the support of one or more professional advisors, be that a tax or financial planning professional.
Do you simply want to pass wealth to the next generation tax-efficiently or do you have other philanthropic goals? Have you considered your own needs in retirement before prioritising others?
Secondly, introduce the other parties involved in the wealth transfer to your advisors and involve them in the conversation.
This step might initially be as simple as providing them with a current statement of affairs including a list of your own advisors.
No two families are the same. When it comes to your plan to pass on wealth, your circumstances should be reflected in an approach that is nuanced and appropriate to you.