How can advisers mitigate wealth transfer concerns?

Clients are exhibiting a number of concerns on the intergenerational wealth transfer, making it imperative for advisers to address these fears.

Earlier this year, Adviser Ratings discovered that 14 per cent of clients are planning to transfer $1 million or more in the upcoming intergenerational wealth transfer.

Some 17 per cent intend to transfer $500,000 to $1 million, and another 21 per cent are looking to transfer $200,000 to $500,000.

On the lower end of the spectrum, 16 per cent said they plan to transfer $100,000 to $200,000, 13 per cent plan for $50,000 to $100,000, and 19 per cent will transfer $50,000 or below.

With more than $3.5 trillion projected to be passed down in Australia by 2050, the research house has highlighted key client concerns surrounding the looming wealth transfer for advisers to address.

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Nearly 50 per cent of clients are worried about tax minimisation, Adviser Ratings uncovered. This is followed by preserving family wealth across generations (42 per cent), choosing the right time to distribute wealth (37 per cent), ensuring equitable distribution strategies (34 per cent), and assisting in family conflict resolution (28 per cent).

“To navigate this challenge, mastering effective strategies has become essential for advisers to meet client needs and secure the financial wellbeing of future generations,” the firm stated.

“Clients are looking to their advisers not just for traditional financial advice, but for comprehensive strategies that address the complexities of intergenerational wealth transfer. This includes navigating family dynamics, tax laws and economic uncertainties to ensure that wealth is preserved and effectively passed onto future generations.”

Advisers are utilising several strategies to address client concerns, with 41 per cent developing comprehensive estate plans and 37 per cent advising on tax-efficient gifting strategies.

An additional 35 per cent are focused on providing family governance and wealth education, and 22 per cent of advisers are setting up and managing trusts to facilitate smooth wealth transfer.

Adviser Ratings described: “Family governance and wealth education are critical components of a successful wealth transfer strategy. 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.”

Providing family education, alongside immediate concerns of tax minimisation and wealth transfer timing, will lay the groundwork for long-term wealth management across generations.

“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.”

With the vast majority of high-net-worth (HNW) clients looking to pass down their funds in the wealth transfer, Irene Guiamatsia, head of research at Investment Trends, recently encouraged advisers to build relationships with younger recipients.

“Many of those HNWs are at that certain life stage where they’re about to move into decumulation, meaning they will take their money out of the system. So advisers need to replenish the client pipeline and really look at the younger end as well,” she told Money Management.

“About 95 per cent of HNWs say they will transfer their wealth to the next generation. Advisers should look at supporting that transition which we’re already seeing play out.”