Impending great wealth transfer threat to advisers
October 28, 2024
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4 min read
- 40% of Australian financial advisers say the intergenerational wealth transfer threatens their business
- 45% of Australian advisers are worried they won’t retain assets from clients’ spouses or children
- Australian advisers report retaining assets 71% of the time when a spouse inherits, drastically decreasing to 38% when children inherit.
With an estimated $3.5 trillion set to transfer over the next 25 years[1], four in ten Australian financial advisers confirm the intergenerational wealth transfer is a threat to their business, and a quarter say they have lost significant assets through generational attrition, already.
Almost half (45%) of advisers are concerned they won’t retain the assets from clients’ heirs, reporting retention of assets 71% of the time when a spouse inherits, drastically decreasing to 38% when children inherit.
New research by Natixis Investment Managers (Natixis IM), created in collaboration with CoreData, surveyed 2,700 financial professionals across 20 countries, including Australia, to provide insight into the challenges advisers are facing, client needs, and portfolio allocation.
Focusing on retention, 87% of Australian advisers are prioritising a specific demographic, with 59% focusing on acquiring clients aged 50–65-year-old. Overall, 79% believe that including heirs in financial planning conversations with clients is crucial to retaining assets.
Natixis Investment Managers Country Head Australia and New Zealand Louise Watson says, “The challenges and opportunities posed by the intergenerational wealth transfer are great. Over the next two decades it is likely to change how advisers operate their practices in unpredictable ways, alongside the quality of advice review and the digital advice revolution. What’s clear is that Aussies still need an adviser now more than ever, and keeping the family involved is key.
“With the current economic environment creating uncertainty amongst investors, utilising an adviser is one of the best ways Australians can ensure they will achieve their financial goals. Amongst uncertainty, it’s important to incorporate defensive assets to protect against the unforeseeable like changes in market sentiment, and as always advisers play a crucial role in educating their clients on market movements, return expectations and across asset classes.”
Amidst a volatile economic environment, high cost of living, and interest rates, the top five questions Australian advisers are hearing from their clients are:
- Will I reach my goals? (85%),
- Am I protected from market downturn? (77%),
- What do I need to outpace inflation? (73%),
- How do I preserve and pass on my wealth? (65%)
- Why should I get back into the market if cash is so attractive? (61%).
Additionally, Australian fears around US election volatility are confirmed, with advisers reporting 51% of clients questioning if they should be concerned about their investments in the lead up to November 5th.
Over half of Australian advisers (53%) think continued scepticism of US election results will have a negative impact on markets and almost half (49%) think the election result hasn’t been priced into markets yet.
With the continuing market rally, nearly two fifths (39%) of financial advisers warn that the biggest risk for their clients is chasing returns by trying to time the market. Advisers also caution that after an extended run-up in equities, investors should be aware of unrealistic return expectations (31%).
Despite rates at 15-year highs, nearly half (49%) of advisers surveyed said it has been a challenge to increase fixed income allocations in client portfolios due to clients’ knowledge or lack of. 79% of advisers are advocating for fixed income due to diversification benefits.
Australian advisers are increasingly planning to incorporate private assets into clients’ portfolios over the next five years (49%), but 79% say the biggest challenge is the difficulty of building a portfolio of private assets at scale. In addition, more investor education is required, as seven in ten (77%) say that clients do not understand the holding period that comes with private investment.
