Financial planning for future generations

Engaging with a financial advisor has many great benefits. From breaking down the jargon that exists around wealth management to providing practical support and quality advice that can make a difference, engaging with a financial advisor is especially important when seeking guidance on more complex issues.

Although we may be aware of the many great benefits a financial advisor can bring to the table, are we taking an active approach when it comes to family wealth and estate planning, or could we do more to ensure a better financial outcome for ourselves and our children?

The importance of intergenerational financial planning should not be underestimated and taking an active approach early is advisable rather than leaving wealth management until nearing retirement.

Micheál O'Driscoll, is MD of FDC, a financial services company that has been in business since 1973. With over 46 years’ experience providing financial advice, the firm has worked extensively on family wealth planning and is currently working with and advising the third generation of families. 

According to O'Driscoll, financial advisors should recognise the opportunity that working with clients and their children presents. “If you can engage young adults in financial planning it really serves them well for the future because they are first movers and they tend to make provisions earlier than their peer group.”

He believes that unless the educational piece is played by the parents and advisors in early adulthood, young adults tend to be at the first house purchase stage before they engage with a financial advisor, at which point they could be in their 30s.

From a customer perspective, the benefits of wealth management are plentiful. “We tend to make the assumption that clients have choices when it comes to accessing financial products and that is completely different to what we feel is wealth management,” O'Driscoll says. “If our role is only placing product then that’s not an added-value service; that’s just a distribution service based on cost.”

For FDC Financial Services, wealth management is about informed choices, guided decision-making and scenario testing so that clients can see the implications of the choices they make as opposed to being told what the best products are.

“When we look at the intergenerational transfer of wealth, we see the opportunity as being an active one where the adult child is involved with the parent and the decision-making around that,” he explains.

In addition, O'Driscoll also points out that it makes sense to have financial planning across the generations because decisions need to be made with the assets that are going to be used by the parents and attained by the next generation coming into a business, for example.

According to O'Driscoll it’s important to understand what the future needs of a client will be.

“You can simply do the maths on what assets you are going to have at the point of retirement and what’s available to you in terms of a future income. Once that analysis is done, and when it’s obvious that there is going to be surplus for distribution through an estate, then it makes sense to separate those two matters.”

The team at FDC identify what the needs of their clients are, what the asset and income forecast might be, and the inheritance available to distribute. Then they create that division or look at actively transferring the assets, in part during a client’s lifetime, or if not during their life, then through a Will. 

“Indications show that 50% of clients change their agent at the point of retirement. Rather than a simple blunt indication of dissatisfaction, when you look behind this number it shows that many clients are only seeking specialist advise at this critical stage from an advisor. My argument is that clients need to be much more proactive and be engaging with an advisor long before retirement,” O'Driscoll explains.

“Clients create the wealth, all we do is to provide the advice and guidance on how best to achieve their financial goals,” he concludes.

Taking a small action today and speaking to us or a financial broker could have a great impact on your future. With a wide range of options, control and flexibility, you can choose a pension plan that's right for you. If you’re wondering where to start, you can find a local financial advisor near you with the Zurich Advisor Finder.