Families failing to engage their younger members on Financial Planning estate planning issues will face increasing risks, a senior executive at wealth manager St. James’s Place has warned. 

Alex Loydon, director of partner engagement and consultancy at SJP, told Financial Planning Today that getting younger generations involved was critical to effective Financial Planning.

She said involving parents, grandparents and adult children was vital for Financial Planning as the next generation is faced with a rapidly changing financial landscape and less financial security.

Younger family members have not grown up in an environment with any formal financial education and are facing retirement without the same provisions as their parents and grandparents, she believes.

She said: “I’m not saying their grandparents were any more financially literate, but retirement was largely planned for them and they’ve ridden the wave of huge rises in property prices, in a way the next generations are unlikely to see. 

“I’m not saying we won’t see further rises property prices, but one thing for certain is gone are the days of state pensions and defined benefits funding retirement.

"There is increasingly complex tax legislation, more volatile and larger markets into which family wealth can be invested along with family dynamics such as divorce, all of which could very easily erode family wealth. These are the risks. If families don’t engage the next generation and encourage them to face into these risks, children and grandchildren will fail to recognise them and family wealth will fall victim to them.”

Ms Loydon said that she believes philanthropy and ESG are key tools for Financial Planners looking to engage the next generation with receiving advice.

She said: “The objectives of the next generation are going to differ from their older family members and financial advisers need to be cognizant of this. They are more aware of environmental, social and governance factors – I’ve even heard children ask their parents whether their current investment strategy supports sorting out the mess their parents and grandparents generation has created.

“We also see philanthropy used to engage the next generation. Setting up charitable trusts and inviting children to join as advisers, for example, enabling them to take part in the investment decisions and making distributions, is a great way to introduce them to what can sometimes be perceived as the more complicated and mundane elements of wealth management. With a purpose and a way to support something they are passionate about, it’s amazing the level of engagement you see.”

SJP offer fees structured around the total level of family wealth under management in order to attract different generations of the same family to use its services.

She added that by encouraging the younger generations to get involved with their parents and grandparents Financial Planning, SJP has seen them become clients themselves.   

She said: “We see active engagement as a family positively impact young people’s attitude towards taking advice.  If they’ve grown up around wealth, or been party to conversations and decisions about wealth, in turn they understand it and the risks involved, so they tend to walk towards it.”