Why advisers fear intergenerational wealth transfers

According to the 2022 Schroders UK Financial Adviser Survey, the majority (59 per cent) of advisers are concerned they could lose their businesses as wealth transfers between generations.

This fear is a new trend and marks a significant shift in attitude towards what was until recently considered a major opportunity for wealth managers across the world.

“In our previous surveys, nearly 80 per cent of advisers indicated that wealth transfer provides a significant opportunity, yet clearly, the challenge of retaining assets within a business when it transfers is now more broadly recognised,” the survey noted. “Perhaps we should be reframing this important issue as ‘the great wealth retention challenge’.”

In Australia, the Productivity Commission estimates that Baby Boomers will pass on $224 billion each year in inheritances by 2050. While this has been touted as a major opportunity for financial advisers, the reality can be quite different.

Jason Chequer, partner and head of advice at Sayers, is a bit of a specialist when it comes to wealth transfers between generations, particularly for high-net-worth (HNW) clients.

“The majority of people who inherit wealth will discard the previous generation’s financial advisers. It’s over 70 per cent,” Mr Chequer said.

He believes advisers need to focus as much on the family as they do the investments. Without spending significant time understanding the hopes and fears of each generation, he says the transfer will probably be unsuccessful.

“We come into estate planning and families from a legal lens, an accounting lens, and from an event lens. But who prepares the family for it? Who prepares that first generation to let go?”

Unlike Europe, the majority of wealth in Australia is relatively new and is still being transferred from the first generation to the second.

“When there are siblings, it becomes a completely different dynamic,” Mr Chequer said. “In my experience, focusing on the investments, financials and legal work is not going to be a recipe for success.”

Mr Chequer has been working with a Tasmanian family for eight years on an intergenerational wealth transfer. The younger generation are in their 50s and 60s, something that is not unusual for Australian families.

“It takes a lot of time and a lot of effort. There is a higher level of emotional intelligence required and it can be quite overwhelming,” he said.

“There are very few advisers who are willing to commit across a family and have relationships with different family members and the family as a collective.”