What are the top wealth transfer priorities for advice clients?

With the 2021 Productivity Commission report predicting $3.5 trillion to be transferred by 2050, many Australians and their advisers have begun preparing for the massive task.

Adviser Ratings’ Advice Landscape 2024 report has revealed clients’ most pressing concerns during the wealth transfer process and the strategies advisers are using during the transfer.

According to the report, one in five clients (21 per cent) plan to transfer between $200,000 and $500,000 to their children or other beneficiaries, and almost a third (31 per cent) will transfer more than $500,000.

With such large amounts of wealth being transferred to the next generation, many are looking for the best strategies to ensure the safe and efficient transfer of wealth.

“Three-quarters of advisers’ clients plan to execute a transfer to children or other relatives and increasingly, advisers are providing advice around how to implement these strategies,” the report said.

When approaching the transfer, the report found that advisers are using comprehensive estate plans as the primary strategy for transferring wealth, with 41 per cent claiming to do so.

Advisers are also looking to utilise tax-efficient gifting strategies (37 per cent), provide family governance and wealth education (35 per cent), and set up and manage trusts (22 per cent) to prepare for and facilitate the transfer of wealth.

As clients approach the daunting task of transferring their wealth, the most common issue of concern is tax minimisation, with 49 per cent noting it as a primary issue and preserving their family wealth across generations (42 per cent).

Furthermore, clients are unsure about the right time to distribute their wealth (37 per cent), which the report said will likely “be a bigger conversation in the future, with younger generations increasingly locked out of the property market or needing assistance from their parents”.

While retirement income remained the most common topic for clients to ask about, one in five (22 per cent) practices reported that clients were asking about helping the next generation to invest, which may be a result of clients preparing to transfer their wealth to children or other such beneficiaries.

Recent economic activity has also been a cause for concern among clients, with 36 per cent of practices stating that clients have begun to make enquiries regarding the recession and the potential impact it could have on their portfolios.

“Clients are feeling the pressure of inflation and concerned about its impact on their wealth, with CPI remaining persistent at 4.0 per cent (as at June 2024). In these times, clients seek preservation strategies, in addition to growth strategies, in order to maintain the wealth they plan to transfer,” the report said.