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OppenheimerFunds’ new proprietary research study, The Generations Project U.K.,1 looks at the dynamics of the often-complex relationships between U.K. high net-worth (HNW) investors across generations and advisers who serve HNW investors.

The study reveals some stark disconnects among HNW investors and the advisers who serve HNW investors:

  • Advisers generally are under-engaged with clients’ families, tending to focus on the primary contact within each family, and thus risk losing relationships with next-generation family members.
  • Millennial advisers offer fewer tailored client services than older advisers, and may “future-proof” their business if they can acquire the expertise to deal with succession-planning issues.
  • Too few advisers help HNW families with financial education across generations and are missing an opportunity to help future generations maintain their family wealth, especially in light of our finding that HNW families are reluctant to discuss finances with other family members.

Financial Advisers Under-Engage with HNW Clients

The desire of many HNW investors to leave a legacy for their heirs creates a natural opportunity for advisers to strengthen their long-term relationships with families as wealth transitions across generations.

However, when OppenheimerFunds asked 400 U.K. HNW advisers of all ages how they maintain client relationships and retain spouses and heirs of clients:

  • 81% said they talk about estate planning with their primary clients as a way to retain the spouse,
  • 70% are having these conversations as a way to retain heirs of clients, and
  • 25% do not prioritise the retention of the next generation as clients.

Our findings show that advisers tend to be under-engaged with both their primary clients and their clients’ families. For example, only 40% of advisers advise their primary client about spending, and still fewer (32%) teach their clients’ children about spending. The vast majority (88%) of advisers explain investment concepts to their primary client, but only slightly more than half (54%) work to educate the next generation about investing principles.

Advisers who are proactive in building long-term relationships with the entire client family can prepare spouses and younger generations for the responsibilities of wealth and help preserve that wealth whilst minimising disruption to financial continuity.

Taking a Multi-Generational Approach

The Generations Project’s findings about the level of adviser engagement with HNW clients across generations may serve as a wake-up call for advisers, as it comes amidst the greatest inter-generational transfer of wealth in history – an estimated £115 billion in the U.K. by 2027.2

Our findings indicate that the established relationship between adviser and client are in a state of quiet flux. U.K. advisers have traditionally tended to focus on a particular generation, rather than taking a “whole family” approach, often to the detriment of inter-generational planning and relationships. If advisers wish to retain an entire family as a long-term client and ensure the smooth transition of family assets from one generation to the next, advisers have to learn to engage with all the different generations. The results of this study may help advisers build and strengthen their relationships by increasing their understanding of the challenges and priorities that face the different generations.

Generational Challenges and Adviser Disconnects

It’s not just advisers who aren’t engaging: HNW investors also appear somewhat reluctant to discuss finances with their own families. Nearly half the investors we surveyed (46%) aren’t currently talking with their spouse or partner about their finances – and 30% have never discussed them. By facilitating and supporting communication and understanding across the generations, advisers can help to smooth the path to inheritance.

Our study also revealed a sizeable gap between what investors want and what advisers believe they want. In particular, many advisers underestimate their HNW clients’ prioritisation of good investment performance. The most important quality HNW Millennial investors seek in a financial adviser is good investment performance (38%); however, 40% of advisers think that HNW Millennial investors’ top priority is for their adviser to have a clear understanding of their goals, with good investment performance ranking only eighth amongst advisers, at 21%, along with fees/commissions.

To be sure, evolving investor expectations, changing priorities and generational preferences are having a profound effect on the adviser-client relationship. By transitioning from a one-on-one service to a “whole family” model, advisers may be better positioned to grow relationships and provide trusted advice to the entire family as wealth transitions from one generation to the next.

Download The Generations Project U.K. Report here.

View the results of our U.S. study here.The U.S. report is also available in French, German, Spanish & Swedish.

 
  1. ^OppenheimerFunds’ The Generations Project U.K. study was conducted with global research firm CoreData Research. We surveyed 900 investors and advisers in the U.K. Minimum net investable assets for investors to qualify for the study was £250,000 for Millennials and £500,000 for all other investors. U.K. adviser qualifications included £25 million of assets under management, with the majority of their book of business comprising high-net-worth clients. The survey was conducted online from December 2017 to January 2018.
  2. ^Source: Unprepared IFAs Could Miss Out on the ‘Inheritance Economy’ as Nearly £1 Trillion Set to Pass to the Next Generation in the Next 10 Years, Centre for Economics and Business Research, 10/5/17.