ADVISERS RISK MISSING OUT ON BENEFITS OF INTERGENERATIONAL PLANNING
- Nearly two out of five firms do not have an intergenerational business strategy and just one in three have discussed plans with their main clients’ children
- HSBC Life (UK’s) Three I’s of Investable Capital Report outlines the role of trusts and investment bonds in supporting intergenerational planning
Advisers are risking losing potential clients and business despite believing that taking an intergenerational approach to clients is important, research* from HSBC Life (UK) Limited (“HSBC Life (UK)”) shows.
The national study with advisers found almost all (96%) say intergenerational planning is important for their businesses with 56% saying it is highly important. However just 62% claim to have a clear intergenerational business strategy with 30% saying they are working on one. Another 6% say they plan to implement a strategy while 2% have ruled it out.
A key issue identified by the research for HSBC Life (UK’s) report, The Three I’s of Investable Capital, in association with consultancy Technical Connection, is lack of engagement with the children of their main clients. Just 30% of advisers say they discussed the issue with client’s children although 35% say they have met them.
Advisers are more successful at engaging with clients’ partners. Around six out of 10 (58%) say they have met clients’ partners while more than half (54%) say they have discussed financial planning with the partner.
The report identifies the rise of direct-to-consumer platforms as a threat to advisers retaining the business of the beneficiaries of a client’s estate and also the “natural scepticism of younger generations surrounding the value of professional financial advice.”
It argues that intergenerational planning is a “win-win” for clients and advisers with clients able to maximise the tax-efficient accumulation of wealth while minimising the tax on funds withdrawn and on transferred wealth as a result. Adviser businesses secure longevity and greater capital value by building strong relationships with multiple generations of clients.
Advisers need to develop and deploy engagement skills in order to improve their intergenerational business with a particular focus on digital communication, advice and guidance, the report says.
Mark Lambert, Head of Onshore Bond Distribution, HSBC Life (UK), said: “Advisers may have worked their whole career to build up their client bank and their clients’ wealth but if they don’t put into place strategies to build a trusting relationship with inheritors there is a very real risk that this wealth will go elsewhere.
“While many advisers do have a relationship with a client’s spouse it can be less common for them to also know their children. This makes it even more important to encourage financial conversations with clients, spouses, and beneficiaries. Encouraging ongoing conversations is the key to retaining future clients.”
HSBC Life (UK)’s report outlines how capital investments can be structured to achieve intergenerational and estate planning as well as the role of initial and ongoing advice in ensuring an optimal outcome from the investment of capital and the potential future tax treatment of capital investments.
Onshore bonds offer zero tax on cash dividends at a policyholder level while non-dividend income is taxed at 20%. Gains within the Bond are subject to UK life fund taxation which means that the policyholder is treated as having paid basic rate tax on these gains. Top slicing relief and 5%p.a. tax deferred rules on withdrawals remain. Lifetime transfers by way of assignment where there is no exchange of money or money’s worth are not taxable events and basic rate tax credit in determining policyholder tax on realised chargeable gains continue.
The HSBC Onshore Investment Bond, a tax effective medium to long term lump sum investment wrapper, can be accessed with a minimum investment of £15,000 providing the potential for capital growth, while still allowing clients to make withdrawals from their investment. It offers clients access to around 3,800 funds via open architecture.
HSBC Life (UK) does not replicate funds offered by external fund managers. It enables investment in the funds directly, ensuring that consistency of approach across the investment solutions that advisers recommend to their clients.
Please click here to download the report: https://www.life.hsbc.co.uk/three-i-report/
Notes to Editors:
*Independent research conducted among a geographically representative sample of 200 advisers across the UK representing 200 companies who were interviewed on the phone. The sample was weighted to be representative for assets under management and number of RIs. Consumer research was conducted online with a sample of 1,000 clients with a minimum of £25,000 investable assets who currently have a financial adviser or saw one within the last three years. The sample was weighted to be geographically representative
Media enquiries to:
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Ellis Ford
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Eleanor-Fei Pinnegar
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Eleanor-Fei.Pinnegar@citigatedewerogerson.com
About HSBC Life (UK) Limited
HSBC Life (UK) Limited is part of the HSBC Group, one of the world’s largest banking and financial services organisations. HSBC Group serve more than 40 million customers worldwide through a network that covers 64 countries and territories in its geographical regions: Europe, Asia, North America, Latin America, and Middle East and North Africa. We aim to be present where the growth is, enabling businesses to thrive and economies to prosper, and, ultimately, helping people to fulfil their hopes and realise their ambitions.
HSBC Life (UK) Limited was founded in the UK in 1988 and offers insurance services to meet protection and investment management needs. Our services and solutions are available through HSBC banking channels and selected third parties, including advisers and aggregators. For more information on HSBC Life (UK) Limited range of services go to https://www.life.hsbc.co.uk/ and for more information on HSBC please go to https://www.hsbc.com
About HSBC Life
HSBC Life is the insurance business of the HSBC Group. We manufacture life and health insurance products in Hong Kong, mainland China, Singapore, India*, France, UK, Malta, Mexico, and Argentina. HSBC Life offers a range of insurance products to meet the protection, education, retirement, wealth growth and legacy planning needs of our customers. Our services and products are available through HSBC banking channels, selected third parties, including financial advisers and aggregators. *Through our joint venture, Canara HSBC OBC Life Insurance.
About HSBC Holdings plc
HSBC Holdings plc, the parent company of HSBC, is headquartered in London. HSBC serves customers worldwide from offices in 62 countries and territories. With assets of $2,990bn at 31 March 2023, HSBC is one of the world’s largest banking and financial services organisations.