‘Significant opportunity’ for advisers to bridge generational divide

According to AMP research, three in five Australians under 40 haven’t spoken to their parents about future wealth transfer, presenting an opportunity for financial advisers to facilitate discussions regarding intergenerational wealth concerns.

The research found that half of those aged under 40 years old are expecting to financially support their parents as they age, despite three in five believing their generation has it harder financially than their parents did.

Previous research by AMP shows that Australians 65 and over tend to agree with this sentiment, with four in five believing their children face harder or similar financial challenges now compared with them at the same age.

Housing is among the chief concerns of those under 40, with four in five who don’t currently own property believing it is out of reach for them. Compounding this, four in five under 40s believe that not owning a property will be detrimental to their long-term wealth in retirement.

When it comes to funding their retirement, Australians under 40 believe that home ownership will be the main contributor to their wealth (40 per cent), followed by savings (23 per cent) and super (18 per cent), and their investments including investment property (15 per cent) and shares (5 per cent).

Highlighting working Australians’ desperation to enter the housing market, four in five said they would consider purchasing a property with a friend or a family member.

Despite these concerns, four in five say they haven’t asked their parents for any financial support, and only one in five say they are relying on financial assistance and/or inheritance from their parents for their future financial security, determined to build wealth independently.

AMP director of retirement Ben Hillier said the findings revealed an “interesting dynamic within families”, particularly as parents and children struggle to discuss important financial matters.

“It’s worth considering these findings with the knowledge that many Australian retirees are fearful their savings won’t last – a fear which prevents spending and impacts their quality of life. It’s also very possible these concerns are inadvertently conveyed to their children and hinder open dialogue on wealth matters,” Hillier said.

He highlighted that this disconnect between generations, coupled with the financial concerns of working Australians, presents an opportunity for advisers to help them navigate the complexities of wealth building and retirement planning.

“We have a significant opportunity in Australia to help more retirees build their financial confidence, empowering them to fully enjoy their post-working years. This can be achieved through better access to lifetime income solutions and financial advice, improved financial literacy at all ages, and a simplified retirement system,” Hillier said.

“Most importantly this confidence could improve their quality of life in retirement, but it could also be a catalyst to open the lines of communication with their children on important wealth matters, such as inheritance and estate planning. It may even empower them to support their children financially, which we know from AMP’s previous research they’re keen to do.

“Importantly, the sharing of knowledge and insights could help build greater collective financial literacy and confidence within the family unit.”

AMP Bank group executive Sean O’Malley added that changes also need to be made at a government level to ease some of the financial stress for working Australians.

“It’s also clear from the research that under 40s are concerned housing unaffordability will impact their long-term wealth – a justifiable concern given home ownership is one of the key pillars for wealth in retirement for most Australians,” O’Malley said.

“Building the financial confidence of retirees and finding better ways to unlock home equity would also empower more older Australians to support their kids.

“While this needs to be tackled at a macro level by federal and state governments, there are other, more immediate options for younger Australians wishing to purchase their first property.”