How financial advisers can add more value

The need for qualityfinancial advice is increasingly important due to several factors, notably poor financial education, lifestyle creep, and inheritance windfalls. In a nutshell, we have a society that lacks basic financial competency to manage their own personal budgets, who seek and pay for a lifestyle beyond that which they can realistically afford on credit cards and personal loans and then ultimately expect to pay off the said accumulated debt by way of an inheritance windfall.

Financial advisers pay little attention to these matters, largely because they tend to focus on individuals who’ve managed to escape the above and into financial solvency, which often equates to having at least £100,000 in investible assets or in accumulated pensions. In this climate, there’s an argument for much needed financial coaching to sit alongside other service offerings such as financial planning and wealth management.

The value of a financial adviser should be to mitigate the impact of volatile economies, volatile markets and even volatile lives.This is done by carefully considering a clients’ life plan and financial context and putting in place tailored protection, investment and retirement plans. But unfortunately, too many financial advisers fail to recognise the threats to their client’s wealth, that doesn’t come from poor fund management or a lack of diversification or a downturn in the markets, but rather from:

  1. inheritance disputes that are increasing year on year
  2. increase in divorce settlement claims
  3. a poorly structured early inheritance
  4. a failure to inheritance plan
  5. a failure to gift cash and property to children efficiently during their lifetime
  6. a failure to advise due to a client’s loss of mental capacity

For the first time ever in British history, we will see a staggering £5.5 trillion pass from one generation to the next over the next 30 years. Poor planning or lack of planning will see financial advisers’ assets under management dwindle as they’ve failed to build a relationship with their clients nearest and dearest who need advice on how to best access any inherited wealth and to also improve their clients’ chances of receiving an inheritance that isn’t otherwise whittled away due to poor structuring.

Further, financial advisers need to become conscious of the plethora of claims that their clients’ estate could be facing as a result of inheritance disputes due to unresolved fracture lines coming to the fore post-death.

Ultimately there is no substitute for face to face advice, as financial advisers tend to see their clients every year to learn about their developments and tailor any plans; there is no other profession that offers the frequency of contact with a qualified and experienced professional about one’s circumstances.

But in order to strengthen their proposition for a time poor and cost-conscious market, advisers need to be aware of asset preservation needs where they can leverage the support of qualified practitioners who can solve the above pain points but also identify further regulated planning opportunities.

Mohammad Uz-Zaman is a private client trust and estate planning consultant who holds accreditations across regulated financial advice and estate planning. He holds a BSc (Hons) in Psychology & Sociology and an MA in Islamic Studies. He is also a member of the Society of Trusts Estate Practitioners, holding the STEP Advanced Will Writing Certificate. He works closely with financial advisors from several major practices.

Sources:
https://www.standard.co.uk/lifestyle/london-life/8-pieces-of-money-advice-you-cant-afford-to-ignore-a3498256.html
https://www.huffingtonpost.co.uk/entry/millennial-reliance-on-inheritance-from-parents-entrenches-inequality_uk_5abb4a85e4b06409775b46b4

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https://www.ft.com/content/2ce52a2a-c63e-11e8-ba8f-ee390057b8c9 (inheritance disputes)
https://www.independent.co.uk/money/the-truth-about-your-inheritance-a7545696.html
https://www.kctrust.co.uk/partners/inheritance-economy

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