Addressing the intergenerational advice gap
Richard Wake, Chief Customer Officer, UK and AUS of intelliflo
According to intelliflo’s latest Advice Map of the UK, you’re most likely to receive financial advice if you’re a man over 50 living in London or the South East of England. Two out of three advised clients are aged 50 to 79, while less than one in eight are under 40 and only one in twenty are under 30.
The Advice Map, based on nearly three million advised client records within intelliflo office, highlights not just who receives financial advice, but crucially, who doesn’t. At intelliflo, we believe that understanding those who fall into the advice gap will help close it. Broadening access to advice is a win-win – improving financial resilience for UK consumers while providing firms with a more diverse client base to support long-term growth.
Looking at our age figures against Office for National Statistics (ONS) population data, it’s clear that people aged 50 to 79 receive advice at a significantly higher rate than their population share would suggest. Conversely, those aged 20 to 39 are taking advice in much lower numbers than expected.
Changing life milestones
Why does this matter? Supporting those approaching retirement with financial planning has kept many advice firms busy in recent years. ONS figures show that people in their 40s and 50s earn the most, while those aged 60 to 64 hold the most wealth – nine times as much as those aged 30 to 34! Baby boomers have benefited from the UK’s post-war economic success, defined benefit (DB) pension schemes and rising house prices. It’s little wonder that older generations seek financial advice to make the most of their wealth.
In contrast, younger generations face more complex financial choices. The Institute for Fiscal Studies (IFS) found earnings growth has grown by just 6% between 2009-10 and 2022-23. Unsurprisingly, ONS data shows young people are living with their parents longer and the average age of first-time buyers has risen from 32 to 36 over the past twenty years.
With 30-year mortgages becoming more common due to rising house prices, the average age people own their home outright will rise in the coming years, potentially beyond the average retirement age. At the same time, the decline in DB pensions means individuals are increasingly reliant on investment returns to provide an income in later life.
Arguably seeking financial advice earlier in life is more important than ever to fund key milestones and maximise long-term wealth. However, younger people at the start of their wealth accumulation journey may not have sufficient funds for firms to feel confident they will receive good value from their services.
The Consumer Duty requirement to demonstrate fair value has had the unintended consequence of more firms offboarding clients they believe they can’t offer value for money. Recent research from NextWealth found 72% of firms have increased offboarding in the last 12 months and our data reflects a similar trend.
The importance of inheritance
It’s important to remember though, that the wealth held by today’s older generations will pass down to their children and grandchildren. Kings Court Trust estimates that by 2047, £5.5 trillion in inheritance and financial gifts will pass between generations. In 2023, IFS predicted inheritances will play a growing role in building wealth, with those born to wealthy parents expected to inherit twice as much as the previous generation, relative to their lifetime income.
Proposed changes to pensions inheritance tax from April 2027 may accelerate this wealth transfer. We’re hearing that advisers are increasingly discussing lifetime gifting as a way to reduce future IHT bills.
Millennials (aged 29 to 44) make up a quarter of the global adult population according to the World Economic Forum. They represent a significant market that firms cannot afford to overlook. So how can we engage younger clients with financial advice, while ensuring wealth stays within the firm when it transfers to the next generation?
Technology must be part of the solution. It can support engagement across multiple generations, helping to build strong relationships with the whole family. Features such as family linking, where well-established clients shoulder more of the cost while younger members benefit from earlier access to advice, can be particularly effective. Running cashflow planning scenarios that compare gifting versus inheritance can also help families explore their options.
Technology can also lower the cost of advice, making it more accessible to younger clients. Digitising and automating tasks like fact-finding and reporting, including integrating appropriate AI tools, can reduce costs, minimise errors and support regulatory compliance. Eliminating friction in the advice journey also allows advice professionals to spend more time with clients, including onboarding the next generation.
The advice gap across generations presents both a challenge and an opportunity. By leveraging technology and adapting service models, firms can engage younger clients earlier, helping them build financial security while ensuring long-term business growth.
This article was first published in Money Marketing on 25 April. Please find a link to the original piece here.
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