The Great Wealth Transfer: Why It’s Good to Talk

In the current climate, there is uncertainty in all of our lives with both health and financial concerns. However, while we are all understandably focusing on the here and now, it might be worth using this time to take a step back and review your long-term financial wellbeing as well. This newsletter takes a look at some of the areas you might want to consider. Of course, we are on hand to support you through any challenges ahead.

Transferring wealth from one generation to the next is a difficult conversation topic, but with the baby boom generation expected to pass down a record-breaking amount of assets over the coming years, confronting this taboo has never been so important. And experts suggest that, while discussions involving money can be uncomfortable, the best approach is invariably to talk.

The next 30 years are expected to witness the largest ever intergenerational passing of wealth as baby boomers – the wealthiest generation in history – prepare to pass on assets to their heirs. Commentators have dubbed it the ‘great wealth transfer’ with estimates1 suggesting an unprecedented £5.5tn could be set to pass between generations in the UK.

Elephant in the room

While the significance attached to the wealth transfer process is unquestionable, most families remain uncomfortable talking about money, with finance among the few remaining taboo topics. As a result, discussing money issues with their children can prove a difficult task for many parents, with conversations typically awkward or stilted. However, it is vitally important retirees involve their offspring in financial planning decisions if the wealth transfer process is ultimately to be successful.

A balancing act

The issue of inheritance unsurprisingly raises a number of concerns for parents. For instance, there is the dilemma of wanting to help children financially while not dampening their offspring’s work ethic. In addition, parents need to balance the emotional desire to leave significant sums to heirs with the need to ensure their own financial wellbeing, particularly in an era of spiralling long-term care costs.

Start the conversation

Arguably the key inheritance challenge, though, remains ensuring your children are ready to take on financial responsibility for family assets. Encouraging their involvement in your financial planning decisions now is a particularly good way to boost their financial literacy and ensure they are ready when the time comes. So, introduce them to us and we can help you start those difficult conversations.

1Kings Court Trust, 2018

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

Dividend Growth Rises

Stock market investors had a bumper year for income in 2019, as UK companies paid out a record £110.5bn in dividends. Research2 shows that dividend growth was up 10.7% on 2018 for two main reasons: a generally weak pound and an exceptional year for ‘special dividends’.

Because many UK dividends are declared in US dollars, returns were boosted by comparative sterling weakness due to Brexit uncertainty. The main contribution to the record dividend payout, however, was the exceptionally large £12bn of ‘special dividends’ – particularly from the mining, banking and IT sectors.

Temper 2020 expectations
Experts warn investors against ‘superficial excitement’. When 2019 performance is reviewed with currency factors and special dividends stripped out, underlying dividends rose by just 2.8%, the slowest increase since 2014. So, even before the COVID-19 outbreak, it was unlikely that 2020 would continue the record-breaking trend.

2Link Assets, 2019