Advisers ‘in the box seat’ of upcoming wealth transfer: Fidelity

While the majority of Australians are lacking a comprehensive estate plan to leave behind a financial legacy, those who do increasingly view financial advisers as their preferred guide on the path forward. 

Fidelity International’s latest Rainbow’s end report, which was conducted by MYMAVINS and surveyed 1,500 Australians over the age of 26, finds almost four in five place importance on sharing their wealth with the next generation. However, they identify challenges in leaving a bequest or living legacy such as navigating uncertainty, financial pressures, family dynamics, fair distribution, and ensuring wishes are upheld. 

This translates to numerous opportunities for financial advisers to step in and help with estate planning while also supporting the receivers of the money on their own financial journeys.

Almost a third (28 per cent) of the respondents planning to leave a financial legacy see difficulties in identifying tax-effective strategies.

This was followed by a lack of awareness about the importance of estate planning (20 per cent), difficulty in identifying and valuing assets for estate planning purposes (18 per cent), insufficient tools and resources for managing estate planning documents (18 per cent), and limited access to professional advice and guidance in estate planning (17 per cent).

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“For many older clients, planning their legacy is a primary focus, and service offerings will need to evolve from retirement planning to estate planning to ensure their wishes are fulfilled,” explained Simon Glazier, Fidelity’s head of wholesale sales.

“As it is now, a lack of financial confidence, uncertainty around retirement spending requirements and how to best organise legacy plans can become barriers to effective decision making.”

According to modelling from the Productivity Commission, Australia is expecting to see $3.5 trillion pass from the older generations to younger generations this decade.

Fidelity’s research reveals that, while 67 per cent of Australians intending to leave a bequest have a will, less than 10 per cent have a comprehensive estate plan to transfer their wealth and fulfil their legacy wishes.

A recent survey of 2,000 Australians by Generation Life also found a heavy reliance on wills (49 per cent) and super (34 per cent) to pass on a legacy.

Fidelity’s Glazier added: “What becomes clear is that financial advisers are in the box seat to make the most of the opportunities. 

“There is clearly a need for professional support and financial planning can play an important role here as it can help investors determine how much wealth is needed to achieve financial legacy goals and planners can also work between family members to ensure legacies are transferred fairly and as efficiently as possible.”

Professional advice is identified among the top approaches to deal with any family tensions resulting from estate planning (22 per cent), behind equal distribution (40 per cent), open communication and discussion (29 per cent) and clear guidelines or a written document outlining the distribution process (28 per cent).

“Most people intending to leave a legacy emphasise the importance of open discussions and documented planning with their family, but this can be easier said than done. This suggests a role for financial planners to help provide structure and mediation for these sometimes-difficult discussions on how wealth can be transferred, to whom and when,” Glazier said.

Engaging the next generation 

Importantly, the research identifies how the younger generation is open to more financial education and guidance on how to manage their inheritances.

Gen Y are most likely (44 per cent) to need guidance on their investments big picture finances while over a quarter (29 per cent) would prefer to do it themselves but value support. 

The report identified this age demographic as “excellent clients of financial advisers” moving forward.

“Gen Y are more collaborative in their approach to making financial decisions, and they are far more open to learning from their adviser,” it stated.

Almost nine in 10 Gen Ys are interested in learning more about finance, while only one in two Baby Boomers are.  

“Compared to the general population, more Gen Ys recognise financial planners’ roles in enhancing the next generations’ financial literacy.

“Around four in five Gen Ys believe that financial advisers should play a role in teaching the next generation financial literacy, and only one in 20 think it’s not the financial adviser’s role to teach the next generation,” it noted.