The great intergenerational wealth transfer is dominating discussions across the industry, and for good reason. An estimated $3.5 trillion is expected to change hands in Australia by 2050, potentially making millennials the richest generation in history. The dynamics of asset transfer between generations are rapidly evolving, driven by demographic changes, economic pressures, longer life expectancy, and shifting client expectations. In Adviser Ratings’ annual survey of Australian advisers and practices, this intergenerational shift emerges as a growing focus for both clients and advisers. To navigate this challenge, mastering effective strategies has become essential for advisers to meet client needs and secure the financial well-being of future generations.
Client Concerns and Adviser Strategies
Most advisers are engaging with their clients once or twice a year, with wealth transfer emerging as a recurring topic in these conversations. In particular, clients are increasingly concerned about how persisting inflation and potential market downturns might affect the transfer of their wealth. This has led advisers to focus on both preservation and growth strategies to ensure their clients' wealth is maintained and transferred efficiently.
A significant portion of clients—about 31%—plan to transfer more than $500,000, highlighting the substantial sums involved in these transactions (see Figure 1). This makes it crucial for advisers to refine their strategies to help clients achieve their goals while minimising tax liabilities in an inflationary environment. The work of advisers often includes comprehensive estate planning, tax-efficient gifting strategies, and education on family governance.
Figure 1: How much clients are transferring
Source: Adviser Ratings’ 2024 Australian Financial Advice Landscape Report
In addition to tax concerns, clients are also seeking advice on the correct timing for wealth transfer, which is becoming an increasingly important conversation, especially as younger generations find themselves locked out of the property market or needing financial assistance from their parents. Figure 2 below indicates that 42% of advisers' clients are concerned about preserving family wealth across generations, and 37% are focused on ensuring equitable distribution strategies.
Figure 2: Wealth transfer concerns for clients
Source: Adviser Ratings’ 2024 Australian Financial Advice Landscape Report
Primary Wealth Transfer Strategies
Advisers are deploying various strategies to address these concerns. Figure 3 highlights that 41% of advisers are involved in developing comprehensive estate plans, and 37% are advising on tax-efficient gifting strategies. Setting up and managing trusts is another common approach, with 35% of advisers employing this method to facilitate smooth wealth transfer.
Figure 3: Primary strategies when managing wealth transfer for clients
Source: Adviser Ratings’ 2024 Australian Financial Advice Landscape Report
Moreover, family governance and wealth education are critical components of a successful wealth transfer strategy. By educating the next generation on financial management and governance, advisers can help ensure that the transferred wealth is preserved and grown, rather than dissipated. This holistic approach not only addresses the immediate concerns of tax and timing but also lays the groundwork for long-term family wealth management.
The Road Ahead
As the economic environment continues to shift, with inflationary pressures and market uncertainties, the role of advisers in wealth transfer will only grow in importance. Clients are looking to their advisers not just for traditional financial advice but for comprehensive strategies that address the complexities of intergenerational wealth transfer. This includes navigating family dynamics, tax laws, and economic uncertainties to ensure that wealth is preserved and effectively passed on to future generations.
Advisers who can provide these services will not only meet their clients' immediate needs but will also position themselves as indispensable partners in their clients' financial journeys. As wealth transfer continues to be a major concern for a significant portion of the population, it will undoubtedly remain a key area of focus for the financial advice industry in the years to come.
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