The Covid-19 pandemic has put a fresh focus on intergenerational financial planning. The young have fared much worse than the old and need help.
People in their 20s and 30s, for instance, are two and a half times more likely to work in vulnerable industries like retail and hospitality, and their finances are mostly much more precarious than their older relatives, according to the Intergenerational Foundation.
In contrast, many older people, including advisers’ most prosperous clients, have actually accumulated more wealth in the last year thanks to both rising asset values – at least so far – and reduced expenditure.
So it is not surprising that when Platforum undertook a research project in 2020 for wealth manager Charles Stanley, we discovered clients have become even more interested in providing tangible help to younger relatives. Family and family financial planning has become really important.
Intergenerational advice ‘pertinent’ in Covid crisis
As in so many other areas – working from home and the use of technology, for instance – the pandemic is a moment of inflection, when an existing and sometimes mild trend has taken off on a sharp upwards trajectory. Several drivers have impacted on people’s attitudes and circumstances all at once.
Many of the young are in trouble. Jobs have been lost, businesses have failed, the mortgage market has tightened, parents and other relatives have died or fallen seriously ill. Someone has to help, and where older generations can assist, they often will.
But it is not always easy. Advisers require people skills and experience of a high order to negotiate the emotional reefs that can lie under the seemingly calm waters of a family’s complicated dynamics.
The trusted adviser can help clients decide how they can provide funds, how much they can afford, where to find the resources and how best to structure the assistance – gift, loan or trust arrangements. Technical knowledge is essential, but emotional intelligence is even more crucial.
Isolation from close relatives and life in lockdown have intensified people’s feelings about their families – how much they are missed and what they need. It can prompt feelings of mortality and insecurity and has nudged many more people to think of the attractions of making lifetime gifts – for the benefit of both donors and recipients.
Yet for some individuals and families, lockdown has also nurtured feelings of distrust, envy, resentment and jealousy. Often clients say they want to be fair to their various family members – but fairness means different things to different people.
Advisers have to steer clients through the potential difficulties where, for example, one child is successful and another has done much less well in life. Uneven distributions of assets can lead to conflict, but equality all round may not work out well either.
Advisers should consider the attractions of intergenerational planning, particularly securing the clients of tomorrow.
Danby Bloch is chairman of Helm Godfrey and head of editorial strategy at Platforum
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