Intergenerational financial planning

5 July 2018 | Finance Research

We were asked by the financial adviser firm Origen to talk to their clients about financial planning across the generations: how they feel about it, what they do about it, what aspirations and concerns they have…and how an adviser can help.

We share our findings on how the older generation views family wealth planning.


The issue of intergenerational planning – how families can and should plan to preserve and grow their wealth across the generations – is growing in importance as the first of the ‘baby boomers’ begin to consider how to pass on their wealth effectively. This generation has benefited from (relatively) generous final salary schemes, reasonable economic growth, home ownership and booming house prices – all of which has meant that they have more wealth than any previous generation.

How can this wealth can be used to benefit the family most effectively? Origen Financial Services commissioned us to conduct focus groups among their clients to understand the issue from their point of view – how do they think about and approach (or not) financial planning across the generations?

What we found was that families think more about inter-generational financial planning than they talk about it, and that most of this thinking is done by the parents of adult children.

So, what does planning across ‘three generations’ look like?

The parents’ perspective

The primary focus is on their own financial wellbeing in retirement, doing what they can to prepare for the cost of long term care if it is needed, and minimising inheritance tax when they die. This is both about enjoying the fruits of past labours while still able to do so, and ensuring that they do not become a (financial) burden for the family as they age. This is a difficult balance to strike – how much to ‘spend’ on living life now vs. how much to ‘reserve’ against future needs – and many struggle with this equation.

There is also a strong desire to be able to help their children now if the necessity arises, for example if the children lose their jobs or suffer ill health. But they don’t want to smother or spoil them – and above all they want their children to remain financially independent.

The thought of adult children ‘relying’ on their parents and not making their own way is anathema to many.

This leads to ‘selective openness’ in communication – most ensure that their children know the broad terms of any wills and, importantly, where to find important documents and whom to talk to (notably their financial adviser and/ or a solicitor), but details beyond this are often kept back to protect both the parent (they don’t want to commit to something that they may not be able to honour) and their children (to manage their expectations).

Decisions about financial planning for the wider family are not taken collectively, but by the parents: they make the decisions and then tell their children. Fairness is crucial – it is important not to be seen to favour one child over another in any financial help they are given.

The children’s perspective

For their part the children want their parents to use their money for themselves, rather than preserve it for the next generation. Both generations see the parents’ wealth as something to bestow if there is anything left after their own needs have been met, rather than something to share as equals, or as a ‘pool’ of family money. So most planning is focused on inheritance.

Both generations see their own financial decision making as largely independent of their parents/ children, and there is a real fear of ‘interfering’ in a (potentially) sensitive area. Most of the parents we spoke to had not considered what would happen if one of their children died – what arrangements had been put in place for grandchildren should this happen, what would the legal position be regarding custody and access (especially where family relationships were complicated)?

Many of the participants within the groups made a mental note to have this conversation sooner rather than later with their children because of the discussion!

But what is clear is that parents often feel that many of their ‘Generation X’ children are unengaged in planning for the future – while they don’t want to interfere, they can see potential issues looming for their children as they approach retirement. The sound financial planning that they have benefited from through their own advisers simply does not appear to be in place for many of their children – this not only means that the children may not be able to fulfil their retirement aspirations, but also that they may not be ‘prepared’ to inherit and manage significant sums of money ‘effectively’.

The grandchildren

Generally, grandchildren figure less in the older generation’s longer term thinking than do their parents. Helping grandchildren financially is seen as more the responsibility of their parents than of their grandparents. There is also the possibility (reality for some) of their children divorcing and remarrying, which can lead to more complicated relationships with both the ex-spouse and any grandchildren (and step-grandchildren).

Those with experience of this saw adding financial layers to these complications as something best avoided.

As one participant put it, expressing a view shared by many others, “We’ve left everything equally to our children, and virtually nothing to the grandchildren. It’s up to the children themselves to deal with their children”

However, there is a strong desire to help (and enjoy) grandchildren in the short term – and the main ways of doing this were in paying for education (e.g. private school, and especially university), and for some, wedding costs or giving their grandchildren help in getting onto the property ladder. Here there is a desire to help now and to use money that the grandparents think they can ‘spare’ more than the parents of the grandchildren can.

What are the implications?

Current financial planning for the family is mainly focused on making sure that parents have enough cash for daily needs, savings for occasional needs, and an inheritance plan which includes having an up to date will (often with children among the executors).

Some had also set up Powers of Attorney, and the ones who had not also thought this would be a good idea once it had been raised in discussion. Detailed intergenerational involvement and planning beyond the ‘broad brush’ was rare in our groups – but advantages could be seen in more detailed and two-way communication if carefully handled.

How can advisers help?

Several people mentioned that their adviser had raised issues of cross-generational financial planning with them, and some had taken steps as a result.

This was seen as being within the remit of the adviser, as was the (generally welcomed) suggestion of involving children in advisory meetings – it makes the children more aware of the financial arrangements and introduces them to the adviser (with whom they are likely to have dealings in the future), and it may also have the benefit of educating and engaging children in the whole topic.

Our group participants also said they would be happy for their financial adviser to introduce them to other independent professional advisers like lawyers and
accountants if and as needed, for example to help with wills and Powers of  attorney.

They were less comfortable with their adviser acting as an introducer to other financial services providers like insurers if there were some sort of commercial relationship between the adviser and the other company. This was because they set such store by the independence of their financial adviser that they didn’t want to see it compromised, and for some any commercial relationship between advisers and a company they recommend introduces the possibility of a conflict of interest for the adviser – a possibility the clients would rather avoid.

The clients we spoke to also thought their children could benefit from their financial adviser’s services as much as they do – but not the same services.

The services they most needed were in the areas of cash-flow and financial planning – managing the wealth they already have. They thought their children could use moreadvice on financial planning for the future: wealth creation,  building up savings, investments and pensions. These are areas where some of them thought their children were not putting in enough thought, let alone money.

But these feelings were balanced with an understanding that their children had to make their own financial decisions and a desire not to interfere.

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