Latest News

  • Home /
  • Latest News

Prudential: Five ways to engage your client with the next generation

31 August 2022
Vince Smith-Hughes sets out five simple ways an adviser can start a conversation with their clients as to why they should jointly engage with the next generation...

Intergenerational planning is a hot topic for many advisory firms, which is hardly surprising given people are, in general, living for longer and require financial advice much later into their lives.

This brings with it a whole host of new challenges and opportunities as age and health-related conditions increasingly need to be planned for and, more and more people's estates are set to breach the IHT threshold.

As well as making sure their client's family wealth is cascaded in accordance with their wishes and in as tax-efficient a way as possible, for advisers being involved in the financial planning of more than one generation of a family is an opportunity to broaden their client base and retain funds under management.

Pru's Family Wealth Unlocked report from 2022 shows one in three people of those surveyed are sharing the same financial adviser as another member of the family so it seems the door is often open to advisers but where are the potential stumbling blocks?

Let's consider five simple ways an adviser can start a conversation with their clients as to why they should jointly engage with the next generation on key topics.

Making a will and appointing executors

Pretty much every adviser, or solicitor, I speak to says making a will should be the very first starting point when considering the next generation. Of course, going alongside this is appointing executors for the will. Naturally, children of a client will be often be both an executor and a beneficiary. At such a stressful time for those having lost a loved one it is important they know where they can turn for help, such as how the estate is handled and how it can be wound up effectively. This could require both legal as well as financial advice. If the estate is likely to be complicated it could be that appointing a professional executor might be preferable.

The expression of wish

If a client and/or their partner has a pension scheme chances are that the adviser has ensured that an expression of wish has been completed and sent to the pension scheme in order that the client's wishes in terms of who receives the fund can be taken into account by the scheme's administrator. These are not normally binding but will generally be followed by the administrator unless there is good reason not to.

Even now it is still the case that, despite the options upon death brought in by pension freedoms being available in many schemes, the fund is still paid out as a lump sum. This might easily be a sub-optimal route to take though as the beneficiary remaining a member of the scheme either as a nominee or dependent allows them to keep the funds in the pension tax shelter and draw on the fund - or not as they see fit. This can prove highly effective from both an income and inheritance tax perspective.

Lasting Power of Attorney (LPA)

While no one likes to think about needing to pass control of one's affairs to somebody else, the sad reality is that for many this becomes a necessity. In England and Wales, a LPA for property and financial affairs and a LPA for health and welfare can be set up for £82 each. Similar arrangements exist in the rest of the UK. This is usually far easier and cheaper than applying to the court of protection to take over someone's affairs.

With continuing longevity and the drawdown rules now meaning advisers are often continuing to advise clients till later in life than was previously the case, a LPA looks like a very sensible piece of future planning to have in place. For example, it might well be that financial decisions need to be made on behalf of a parent who has some form of dementia. Though it's often a really difficult subject to broach with someone, the NHS estimates the condition affects one in six people over 80. As a friend and former army captain of mine used to say "hope for the best, prepare for the worst".

Gifting

Gifting to loved ones is a very legitimate way of passing wealth down the generations in a tax-efficient manner. Use of the annual exempt amount of £3,000 and also the gift allowance under the ‘normal expenditure' rules can both be used to good effect by advisers, who will have a multitude of highly attractive options in terms of how these gifts could be made and where they may be invested. Third-party pension contributions for example can help reduce an IHT bill, while also boosting a child's pension and simultaneously increasing their net income if the child is a higher or additional rate taxpayer - a pretty unbeatable combination.

HMRC requires form IHT403 to be completed upon someone's death to document what gifts the deceased made which may fall in full or part outside of their estate. A tip that a veteran adviser gave me many years ago was that completing the relevant sections on this form as the gifts are made can save an awful lot of time and heartache later on.

Keeping important paperwork safe

This may seem obvious but it never hurts to remind people that a loved one is going tohave to deal with all their financial matters and correspond with different parties after they die. Not only is it sensible to put affairs in order as much as possible, it is also important to let that loved one know where all the documentation physically is, who to write to and correspond with etc. That will of course also include the adviser.

Ideally, all important documents such as those mentioned above (as well as insurance policies, house deeds etc) will be stored in a fireproof box with the relevant person(s) knowing where this is kept.

Into the loop

Given all of these reasons for advisers to engage the next generation it is highly desirable to bring them into the loop of family financial planning as soon as possible. It might be that either or both generations are reluctant to engage on this subject, but it is worth persevering - the consequences for all parties of failing to plan could be severe.

Given the widespread use of adviser/client video calls that are now transacted it might be that this is a suitable mechanism to introduce this subject to the relevant individuals at the same time  - this approach might come across as less personal than a face-to-face meeting but could prove much easier to arrange if the relevant people live far apart, as can often be the case.

I believe it is Roy Jenkins who is credited with saying "inheritance tax, is broadly speaking a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue".

In fairness, this is somewhat overused but in AKG research last year 40% of those surveyed said they were concerned about IHT, whereas 74% said they hadn't taken any steps to address it. So while intergenerational planning is much more than just inheritance tax planning, there does seem a desire for engagement on this particular issue. This should be at the forefront of advisers' plans.

You can also get your copy of the Family Wealth Unlocked Report for 2022 by simply filling in your details to the form on this page.
 

30 December 2024

An evolving industrial landscape: post-election insights from the US


30 December 2024

The outlook for 2025


10 December 2024

Beyond the Budget – Unpacking IHT changes for your clients


4 December 2024

Triple Point Venture VCT - Early bird discount extended


3 December 2024

A Postcard from Boston: Onshoring, AI and the regulation of water


3 December 2024

The second Nucleus UK Retirement Confidence Index


25 November 2024

Investing alongside science to deliver a sustainable world


11 November 2024

Triple Point - What Budget changes to Business Relief mean for clients


4 November 2024

Edwards Lifesciences: shaping the future of cardiac care


28 October 2024

Gene therapy is set to change the face of medicine


22 October 2024

What China’s economic stimulus measures could mean for investors


16 October 2024

Triple Point - Venture VCT announces 2p tax-free dividend


7 October 2024

Triple Point - VCTs: a powerful way to help clients pay less income tax


2 October 2024

The next smart move for your clients


26 September 2024

Puma VCT 13 launches new £50m fundraise


24 September 2024

3 steps advisers can take to close the gender pension gap


19 September 2024

Puma Investments- Launches Puma AIM VCT


18 September 2024

M&G Wealth - Six ways to keep clients invested for long-term success


10 September 2024

M&G Wealth - Dash to cash: why it pays to think longer-term with your client’s money


6 September 2024

Join the Defaqto Future of Advice conference


2 September 2024

Triple Point - Understanding Venture Capital Trusts (VCTs)


28 August 2024

M&G Wealth - Keeping it smooth since 2004


19 August 2024

Prudential - Cost reductions and changes to our Strategic Asset Allocation


15 August 2024

Liontrust - Building a sustainable future with social housing


15 August 2024

Puma Investments - Join our CPD webinar: Closing the gaps: IHT and Estate planning featuring Tony Wickenden


7 August 2024

Liontrust - Plugging into the energy transition


6 August 2024

Defaqto - The Future of Advice - The Defaqto Adviser Conference


26 July 2024

Hello Kitty: A big cat in the investment universe?


24 July 2024

Liontrust – A postcard from Japan: enabling the sustainable transition


18 July 2024

Liontrust - Does a brighter future for housebuilding lie ahead?


16 July 2024

Triple Point – Holistic Estate Planning Strategy for Clients


8 July 2024

Triple Point – Join our CPD webinar: helping investors plan for big life events


1 July 2024

Intergenerational wealth planning for difficult times


24 June 2024

Liontrust Sustainable Investment: Annual Review 2023


19 June 2024

Investing in the energy transition


18 June 2024

Triple Point is partnering with ESG Accord to host a webinar: "A Practical Guide to SDR and Investment Labels for Advisers."


17 June 2024

Latest PruFund monthly investment updates


13 June 2024

Defaqto MPS Comparator: the UK's only accurate MPS performance tool


12 June 2024

Hear about Triple Point Venture VCT - 18th June 2024


6 June 2024

The Nucleus Retirement Confidence Index


24 May 2024

Join us for our Breakfast Briefing with Foresight! June 4th at 9:30am


17 May 2024

Looking forward with optimism


8 May 2024

The retirement income advice red paper


8 May 2024

Liontrust Views: Why smaller can be beautiful for US equities


7 May 2024

CPD Horizon Series: Tax planning for life’s key events


18 April 2024

Liontrust: Opportunities from secular growth trends


15 April 2024

Defaqto Roadshow - The challenges and opportunities of pursuing Income


11 April 2024

Liontrust: US small caps are overlooked and undervalued


4 April 2024

Q1 2024 Rebalance – we think the backdrop is good for stocks


21 March 2024

25 years of ISAs: a quarter of a century of tax-efficient savings and investing


4 March 2024

Stepping out of cash needn’t be daunting


26 February 2024

Managing lifetime wealth – trends in the UK retirement advice industry


23 February 2024

Empowering advice for women in finance


14 February 2024

Tech Matters is here!


5 February 2024

Defaqto upcoming event – Engage webinar 22nd February


1 February 2024

The gender divide in retirement confidence


30 January 2024

SDGs in focus: climate and nature


26 January 2024

Tax year end prep. We’re here to help.