Sandwich generation offers advisers chance for ‘lasting relationships’

Mid-life high-net-worth parents, known as the sandwich generation, are feeling the financial squeeze harder than most, juggling everything from their children’s education to caring for ageing parents. With multiple priorities competing for attention, expert financial advice has become essential.

New research from Generation Life, titled Not tomorrow’s problem, showed that nearly 70 per cent of these mid-lifers already seek professional advice, reporting significantly higher confidence in hitting key financial goals compared to their unadvised counterparts.

For financial advisers, the value of engaging with this demographic lies in their demand for holistic strategies.

“I think advice is more critical than ever and I think we know it's more critical than ever because of the royal commission,” said Grant Hackett, CEO of Generation Life.

Speaking on an upcoming episode of the ifa podcast, Hackett said: “Australians are wealthier than ever, the system is more complex than ever. The world is a lot smaller than what it used to be. Having someone to coach you through that or give you guidance … Just having that reassurance is so powerful”.

“We really need a government in place that is going to support financial advice, support financial adviser advisers and actually help everyday Australians. And I can't reinforce how critical that is,” he added.

Generation Life’s research also showed that mid-life clients understand the importance of not just growing wealth but doing so in a tax-efficient, sustainable way. Approximately 40 per cent of this group seek advice on tax-reduction strategies, recognising that after-tax returns are crucial to their financial health rather than focusing solely on performance figures.

Moreover, advised mid-lifers are nearly twice as likely to believe they can achieve their financial goals – such as increasing portfolio returns –compared to those without professional guidance (48 per cent versus 25 per cent).

However, one of the biggest challenges the sandwich generation faces is balancing their own financial goals with the needs of their families.

Many are not only planning for retirement but also helping their children enter the property market or funding education. With high house prices and increasing living costs, nearly half of these clients are concerned about being able to support both their children’s futures and their own financial security.

As such, advisers who can provide solutions that cater to short-term family needs and long-term retirement planning will have a significant impact.

For instance, 52 per cent of advised clients in this group have been able to purchase an investment property, and 50 per cent have helped their children buy their first home – goals that many unadvised clients find difficult to achieve.

“I think advice is more critical than ever and we know it's more critical than ever because of the royal commission,” Hackett said.

Investment strategies differ

Generation Life’s research also highlighted clear differences in the investment strategies of advised versus unadvised clients within the sandwich generation.

Advised clients are almost twice as likely to make voluntary superannuation contributions (38 per cent versus 20 per cent), underscoring their focus on retirement preparation.

In addition, term deposits (31 per cent) and investment bonds (27 per cent) are commonly leveraged by those with advice, linked with other key wealth-building and gifting goals.

Interestingly, advised mid-life high-net-worth parents are also more likely to value flexibility when assessing a financial vehicle or asset class to use (49 per cent versus 19 per cent of the unadvised).

What also emerged in the research is that the greatest opportunities for advisers working with this group lie in helping them better understand the impact of tax on their portfolios.

Even though tax is one of the largest costs associated with investment returns, only one-third of advised clients are actively considering its impact when choosing financial vehicles – 31 per cent of advised and 27 per cent of unadvised mid-life high-net-worth parents.

Generation Life’s research also examined other segments of the Australian population, including aspiring Australians, revealing that although 70 per cent have never engaged with a financial adviser, 51 per cent are open to seeking advice in the future.

To hear from Grant Hackett on Generation Life’s new research, tune in to our podcast from Wednesday afternoon.