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Intergenerational wealth transfers: The risk and opportunity upon the death of your client

Posted by David Masterton | Apr 29, 2021 10:57:09 AM

By David Masterton, Chief Revenue Officer, Kings Court Trust

If you work in the wealth management industry, you’re already likely to be familiar with intergenerational wealth transfers and the associated risks and opportunities that they present to your practice. Although, from my experience, many Financial Advisers have only just scratched the surface and are still unaware of the importance of acting now to retain funds under management upon the death of a client.

In this article, I’m going to share both the risks and opportunities of intergenerational wealth transfers, why Kings Court Trust is the great facilitator of intergenerational wealth transfer, via our differentiated proposition, and why Financial Advisers need to act now.

 

What is intergenerational wealth transfer?

Firstly, let’s start with the definition of intergenerational wealth transfer. It is the term used to describe wealth that is passed down from one generation to another. Whilst intergenerational wealth transfer is one of the greatest opportunities facing the wealth management industry, it also poses a threat as £5.5 trillion is expected to pass between generations between 2017 and 2047.

We’ve created an animation that provides an overview of intergenerational wealth transfers in under five minutes – watch below:

 

The risks

With an ageing population and rising levels of wealth, the UK is set to see substantial growth in the number of inheritance transfers and financial gifts taking place each year. However, despite the opportunity to gain new clients and retain assets through intergenerational wealth transfers, a significant number of wealth management firms and corporations have no active business retention strategy.

Kings Court Trust’s independent research paper, Wealth Transfer in the UK, identified that up to 25% of practices have no such strategy in place. The challenge that the industry faces is how to retain wealth as it is dispersed from one generation to another, over time. Ultimately, this could result in millions of pounds of funds under management being lost if beneficiaries withdraw their funds or are not engaged to become new clients.

 

The opportunities

Your client has trusted you to help them during their lifetime, so it’s only natural for you to help their loved ones finalise their affairs when they’re gone. By introducing a suitable estate administration service, you can prepare your client and their family for what lies ahead. The estate administration process can help you bridge the gap between your client passing away and establishing a relationship with their beneficiaries, enabling you to generate additional revenue.

First and foremost, offering the family support and guidance upon your client’s death will allow you to establish relationships with the beneficiaries and retain funds under management. They will appreciate the advice about the next steps at the difficult time of losing their loved one. On average, there will be nearly four beneficiaries named in a Will, allowing you to build a relationship with them through offering financial advice about their inheritance, with the ultimate goal of gaining them as new clients.

Furthermore, you may reduce the average age of your client bank as beneficiaries of all ages can inherit from an estate. Many beneficiaries will inherit on top of their own wealth so you will also have the chance to increase your funds under management.

Additionally, if you have conversations about estate administration with your clients during their lifetime, they may turn to you if they are named as an Executor. For example, they may be named as an Executor and a beneficiary of their parent’s estate, giving you the chance to gain more funds under your management.

 

Kings Court Trust is a facilitator of intergenerational wealth transfer

Kings Court Trust can be a fundamental part of intergenerational wealth transfer. We look to support advisers and businesses by helping to retain funds under management, introduce new clients and enhance service propositions.

By introducing Kings Court Trust’s differentiated and award-winning estate administration service, you will be introduced to beneficiaries, gain a view of the distributions and receive a generous fee share on successful referrals.

Thousands of advisers around the UK are already using Kings Court Trust’s service to capitalise on intergenerational wealth transfer opportunities and grow their ageing client bases, and we can help you to do the same.

 

Putting it into perspective

Each year, 1% of the population passes away which equates to approximately 550,000 deaths. 50% of these estates will require probate due to the type of assets or value held at the date of death, and 70% of these estates will use professionals to do some or all the work on their behalf.

To put this into perspective, based on average estate values, if you take a client base of 200 clients who statistically will each have 1.2 living parents and 3.66 beneficiaries per estate, there is an opportunity to gain 16 new clients and £3 million in funds under management, per annum.

 

Why Financial Advisers need to act now

Not only is it crucial for wealth management firms and corporations to take action now but it’s also important for them to act quickly and implement an effective strategy. There is a massive opportunity and a surprising number of advisers still do not have a retention or growth strategy.

If a considerable number of your client bank are aged over 70, there is a higher mortality rate of 9% which puts your funds under management at a significantly higher risk. Additionally, if any of your clients are aged between 40-65, you are missing an opportunity to gain new clients and funds under management when their parents pass away.

It’s time to take advantage of intergenerational wealth transfers and ensure you are prepared when a client passes away. Get in touch with Kings Court Trust by emailing partners@kctrust.co.uk or calling 0333 207 5470.

 

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Topics: Intergenerational wealth transfers, Financial Advice