How are advisers navigating intergenerational wealth transfers?

According to data from Adviser Ratings, more than half (52 per cent) of advice clients are planning to transfer at least $200,000 to the next generation.

More than one in five (21 per cent) are expecting to transfer between $200,000 and $500,000, and almost a third (31 per cent) will pass down more than $500,000.

With inflation remaining persistently high, clients are increasingly raising concerns with their advisers about the impact this will have on the transfer of wealth to the next generation.

Among the most common concerns clients are raising with their advisers in relation to the transfer of wealth regard the ability to offer solutions for tax minimisation (49 per cent), preserving family wealth across generations (42 per cent), ensuring equitable distribution strategies (34 per cent), and assisting in family conflict resolution (28 per cent).

Additionally, 37 per cent of clients also enquired about the best time to transfer their wealth. As younger generations struggle to break into the Australian housing market, the ability to access inheritance has become more important, providing crucial funds to achieve this.

Adviser Ratings said that in the current economic environment, it is crucial that advisers refine their strategies and minimise tax liabilities to help clients continue to achieve their financial goals.

In preparation for the transfer of wealth, the most common strategy used by advisers include developing a comprehensive estate plan (41 per cent), advising on tax-effective gifting strategies (37 per cent), providing family governance and wealth education (35 per cent), and setting up and making trusts (22 per cent).

“By educating the next generation on financial management and governance, advisers can help ensure that the transferred wealth is preserved and grown, rather than dissipated. This holistic approach not only addresses the immediate concerns of tax and timing but also lays the groundwork for long-term family wealth management,” Adviser Ratings said.

With Australia’s intergenerational wealth transfer already underway, Adviser Ratings said that clients are looking for more from their advisers to address the complexities that come with facilitating the transfer.

“This includes navigating family dynamics, tax laws, and economic uncertainties to ensure that wealth is preserved and effectively passed on to future generations,” Adviser Ratings said.

“Advisers who can provide these services will not only meet their clients’ immediate needs but will also position themselves as indispensable partners in their clients’ financial journeys.

“As wealth transfer continues to be a major concern for a significant portion of the population, it will undoubtedly remain a key area of focus for the financial advice industry in the years to come.”