Advisers lean into the great wealth transfer’s benefits

Financial advisers who are actively engaged with their clients’ wealth transfer to their children are seeing greater client satisfaction and higher retention rates.

With a well-reported $3.5 trillion wealth transfer set to hit the next generation over the next two decades, advisers’ role to play is only becoming more important. 

Australian Ethical’s 2023 Opportunity Next report, conducted with CoreData, bolsters the vital impact of financial advice on older clients transitioning into the decumulation stage.

Over 60 per cent of advisers have clients who have already transferred wealth to their children and beneficiaries or are in the process, the report found.

Some 47 per cent of advisers seek to address the intergenerational wealth transfer opportunity by facilitating family conversations, with 40 per cent already engaging with clients on this matter.

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Australian Ethical revealed that an overwhelming majority (77 per cent) of advisers who actively encouraged their clients to engage their children in the wealth transfer conversation saw an increase in client satisfaction.

Moreover, 77 per cent of advisers who leaned into wealth transfer discussions reported retention of half or more of their clients.

This was compared to just 47 per cent for advisers who decided to wait for their clients to initiate these conversations.

“There is much to be gained by taking the lead and actively encouraging clients to involve their children as early as possible in wealth transfer discussions. Advisers who actively encourage clients to do so report greater success in retaining the next generation of clients post-transfer than those who only reactively respond to this opportunity,” the report stated.

Leah Willis, Australian Ethical head of client relationships, also emphasised the proactive approach advisers need to take with engaging with the next generation.

“There’s an advantage for financial advisers in engaging early on with beneficiaries, and to help facilitate the intergenerational wealth transfer. We’re already seeing that advisers who incorporate responsible investing into their offerings report higher client satisfaction,” she said.

The role of responsible investing

Australian Ethical underlined the difference in investment values and objectives between those transferring wealth and younger Australians inheriting it. 

With 45 per cent of Australians aged 18–24 planning to invest responsibly in the next 12 months, catering to these specific needs is vital for advisers.

Willis continued: “Responsible investment principles are going to be part of conversations going forward, and being able to understand younger generations’ values and drivers is going to become increasingly important in attracting younger clients.”

Of the advisers who initiated wealth transfer conversations, those who implemented responsible investing saw higher client satisfaction (73 per cent) than those who didn’t (62 per cent).

In addition, over 50 per cent of advisers surveyed agreed that advice practices which have a strong understanding of responsible investing will be able to attract younger clients.

“Advisers are going to be increasingly called on to meet the needs of their clients’ children and beneficiaries, who may have different values or greater focus on responsible investing than their parents did. It’s critical that advisers can have these conversations.”