The generation game: the importance of communication in wealth transfer

The largest generational wealth transfer in history is under way. Which makes it all the more critical that simple steps are taken in order for the process to be efficiently and satisfactorily managed for everyone involved.

It’s a seismic shift that’s just getting started: an unprecedented volume of financial assets is becoming available for retirees to pass down to younger members of their family.

The fundamental strategies and mechanisms of wealth transfer remain essentially unchanged but, given the scale of the figures involved, it’s more important than ever that everyone is aware of the needs and wishes of all affected parties.

For those in possession of the wealth, the initial choices are around what to do with their retirement pot. Once the modelling is complete and individuals know what they need to support their retirement they could choose to spend the surplus, ringfence for potential care needs, put their assets in trust or gift to charities or children. Whatever the route taken, it is important that the choices and decisions are communicated with spouses and dependents.  

“This isn’t about a product or advice, it’s about being involved in the process,” says Mark Campbell, Head of Wealth at Isio Wealth Planning. “And the main barrier is that, as a society, we don’t have these conversations as often as we should do.”

Getting the right people in the room is the first hurdle. “There can be nervousness from older clients to involve their children, and vice versa,” says Jonathan Brown, Chartered Financial Planner at Isio Wealth Planning. “It’s understandable that these are emotive issues and each family dynamic is unique, but the best long-term outcomes arise when communication has been inclusive from the beginning.”

Furthermore, these sensitivities can often result in wealth transfer planning being relegated down the to do list. “There are really simple actions people can take to improve the process. Properly structuring their will, for example, or exploring tenants in common legal structures on owned property” adds Brown, “but often there’s never that urgency or call to action until it’s too late. And that’s when potential benefits or savings are missed out on.”

Indeed, an effective part of wealth planning is focusing the mind by keeping all parties aware of who may benefit most from any inefficiencies: HMRC. It’s therefore unsurprising that realising the true potential of wealth transfer comes down to communication and collaboration.

When everyone does come together in an open and constructive environment, other issues can be resolved too. “There can be a notable gap in the perception of wealth between the generations,” says Campbell. “And that’s hardly surprising given the significantly different economic conditions and employment dynamics that have taken place in society. Age groups spend money in different ways and the current squeeze on spending isn’t going away soon. These kinds of factors mean younger cohorts could find it difficult to match the workplace pension contributions their parents did.”

People are also living longer meaning that the financial implications of end-of-life care are harder to anticipate, another potentially difficult conversation to have as a group. “It introduces a new level of uncertainty,” says Brown, “which in turn can lead to further delays in decision-making.” And that’s where expert, independent wealth planning plays its part. “Ultimately if someone needs guidance then they need to know who to talk to. The family then have a trusted and knowledgeable point of contact right now and going forward.”

Trust is the element that Campbell feels is most important of all. “Yes these are crucial decisions but it’s the humans behind these decisions that matter,” he says. “Families need support that draws upon experience and insight but also the highest ethical standards. The confidence of having someone in their corner through this process is invaluable.”

This communication has been compiled by Isio Wealth Planning (IWP) as a general information summary and is based on its understanding of events as at the date of publication, which may be subject to change. It is not to be relied upon for investment or financial decisions and is not a substitute for professional advice (including for legal, investment or tax advice) on specific circumstances. IWP accepts no liability for errors or omissions or reliance on any statement or opinion. Where we have relied upon data provided by third parties, reasonable care has been taken to assess its accuracy however we provide no guarantee and accept no liability in respect of any errors made by any third party.