5 practical benefits for your clients of financial planning as a family

In the next 20 or 30 years, an eye-watering amount of wealth is set to pass from generation to generation. Indeed, a recent report by M&G Wealth revealed that as much as £5.5 trillion could be passed to younger generations by 2047.

Despite this, many of your clients will likely still be reluctant to talk about money with their loved ones. Personal finance can still be a taboo subject for many, although opening up and discussing issues surrounding money can be beneficial for families.

Here are five reasons your clients should consider including their family – both younger and older generations – in their financial plan.

1. A client’s goals will typically include their family

All good financial planning starts with establishing life goals. What does your client want to achieve in their life?

Do they want to retire early? Start their own business? Support their children? Leave a sound legacy to loved ones?

When considering a client’s goals, many of these will include their family.

A client might want to help their child onto the property ladder or pay for their grandchildren’s school fees. Or, they may have elderly parents with accumulated wealth, and be concerned about Inheritance Tax (IHT).

Considering that a client’s goals may involve family, it makes sense to involve their loved ones in the process. This enables open and honest conversations, which can help all the family to plan more effectively and make best use of their combined wealth.

2. It ensures there is a “joined-up” approach that benefits everyone

The recent M&G Wealth report found that 1 in 3 advised families now share the same financial planner, with around 3 in 5 of those sharing the same adviser as their parents.

The reasons for sharing a planner are instructive:

  • 37% said they “feel relaxed as their family already trusted them”
  • 34% “liked that all the family’s finances would be in one place, so everyone could review them together”
  • 28% went further still, saying they would feel “relieved they’re sharing the same adviser”.

Creating a financial plan that includes multiple generations ensures that there is a joined-up strategy for the transfer of wealth. As all parties are involved, collaborative decisions can be made for the benefit of all.

3. It can manage expectations

If your client has older parents, they may be expecting an inheritance at some stage. Or, your clients’ children may also have ideas of how much they might receive from their parents or grandparents.

However, without a conversation about intergenerational wealth transfer, family members may make assumptions about the likely level of inheritance.

If these prove to be inaccurate, it can generate conflict and resentment. So, creating a financial plan as a family ensures that your clients and their family know where they stand, and that they can manage expectations when it comes to the transfer of wealth.

4. Planning as a family can reduce your clients’ tax bill

In the 2021/22 tax year, estates paid a record amount of IHT. According to official government data, HMRC received £6.1 billion in IHT, up 14% on the year before.

Additionally, the number of UK deaths that resulted in an IHT charge is also increasing. In 2019/20 there were 23,000 such deaths, an increase of 4% on the previous 12 months.

With IHT thresholds frozen until 2026, and rising house prices and asset values pushing up your clients’ wealth, it is increasingly likely that they will face an IHT issue in the future.

Any of your clients with an estate worth more than £325,000 – or up to £500,000 if they intend to leave their home to a child or grandchild – is likely to face an IHT liability on death. With IHT charged at 40%, this could result in a significant tax bill.

Working together as a family can help your clients to mitigate potential IHT issues. For example, a gifting strategy or the use of trusts can ensure wealth transfer occurs during a client’s lifetime, potentially reducing the amount payable in IHT on death.

5. It can cover multiple generations

A financial plan that considers your client’s entire family can provide vital support to both children and grandchildren, but also to older relatives.

In the M&G Wealth survey, 1 in 3 people said that supporting parents and grandparents was a key reason for using the same financial planner. As well as ensuring their finances are being handled by a professional, it can also provide your clients with an opportunity to better understand their wishes and needs.

Get in touch

If you have clients who would benefit from creating a family financial plan, or you’re interested in working more closely with us, please email mail@delaunaywealth.com or call us on 0345 505 3500.

Please note

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.