Advisers need to prepare for wealth transfer now: AUSIEX

A new AUSIEX report has highlighted the importance of advisers discussing the transfer of wealth with their clients to increase the likelihood of maintaining the next generation of clients as they come into their inheritance.

Within the next five years, all Australian Baby Boomers will reach the retirement age, presenting an opportunity for financial advisers as they begin to consider estate planning and the transfer of assets for the next generation.

According to a 2021 Productivity Commission report, an estimated $120 billion in assets will be inherited each year as the intergenerational wealth transfer takes place, potentially rising to an estimated $500 billion each year and totalling approximately $3.5 trillion in assets over the next 25 years.

Highlighting the importance of engaging beneficiaries prior to their inheritance, the 2023 Opportunity Next report by Australian Ethical, conducted in partnership with CoreData, found that 77 per cent of advisers who engaged children in the wealth transfer conversation saw an increase in client satisfaction.

The strengthening of these relationships could lead to the adviser securing the beneficiary as a future client, potentially increasing future revenue.

AUSIEX head of sales, trading and customer relationships, Te Okeroa, said financial advisers have to be prepared to facilitate the wealth transfer and utilise technology to meet the needs of the next generation of clients.

“Industry participants need to accelerate their preparations for intergenerational transfer, as the Baby Boomer boom is over,” Okeroa said.

“With the older generations about to leave the system, the younger generations face different challenges than those that came before them, and the transition to innovation in the digital world is continuing apace.

“It is essential that industry participants become more active in understanding and discussing the changes that are now taking place and engage across the value chain to plan and execute change.”

Okeroa argued that technology will play an increasingly important role in the future of advice, and advisers need to be open to new advancements to remain ahead of the curve with their digital service offerings.

“Advisers are increasingly leveraging digital channels to help beneficiaries better understand the transfer and investment process and how decisions will impact them,” he said.

“Advisers can also take advantage of new client portal and reporting technologies to be better informed as to the composition and performance of their portfolios and help strengthen communication and trust between transfer stakeholders.”

According to Okeroa, technology should be used to provide more bespoke portfolio designs for clients as they inherit new assets, ensuring good communication and trust between them and their clients, allowing them to build a solid foundation for a future working relationship.

“Modern and fully-featured trading platforms provide advisers access to the wide range of markets and asset classes required to build bespoke client portfolios in precise alignment with their objectives and risk profiles,” he said.

“The net effect and arguably a key role of technology through the wealth transfer is to help address the challenges of communication and trust as root causes of transfer, ensuring there is a common and mutually agreed fact-base for stakeholders in order to deliver transfer plans their best chance of success.

“At the same time, technology can help deliver significant operational efficiencies to a practice, allowing them to navigate the challenges and take advantage of the opportunities from the intergenerational wealth transfer.”