One of the most startling stats of the week revealed that 1 in 4 advised clients are now helping their adult children financially.
A survey by Royal London didn’t give much detail as to why, but it is likely that the cost of living and the recent surge in lodging costs are factors.
Royal London warns that while this is laudable, it could affect both children and customers in the long run. Money withdrawn from pensions, savings and investments now leads to less money being saved for retirement. They have a point too.
But it just doesn’t make sense for a family to want to help less wealthy members if they can. At least in part, that’s what family is all about.
I was reminded that more and more of the smart planners I’ve spoken to over the last few years are trying to become “family” advisors, not just couples or individual advisors.
This makes a lot of sense.
Household finances are inevitably entangled, whether the family likes it or not. Inheritance is an obvious area, and, of course, the natural desire to carry offspring up the ladder of increasingly expensive housing.
Most accommodation in the UK, whether rented or purchased, is very expensive and it is debatable whether many young people would be able to climb the ladder these days without the help of a ‘dad and mum’s bank’. be. That’s an issue for another column.
Meanwhile, planners will be increasingly called upon to help other less affluent families. I’ve certainly heard stories of giving free advice to students and younger generations to help them take the first steps towards saving and planning for retirement when they start working. .
And I’ve heard of a few grandparents getting involved in financial planning. For planners, it all means more clients, but it probably makes sense when it becomes unprofitable to advise too many families without adequate fees to cover the costs.
Another trend highlighted by the Royal London survey is the tendency of older children to live with their parents. The lack of adequate affordable accommodation here is probably the culprit, but unless it’s the only way to buy a roof and it’s by choice, a large number of single 40-year-olds are staying with their dads. It’s a pity that you have to live with your mother. on their heads.
Royal London said the findings suggested some people were withdrawing some of their pensions, especially to help their children. There were also indications this week that some corporate pensioners are retiring to save money. Both are disappointing.
With inflation still high, people need to invest in their pensions more than ever before to avoid derailing their long-term retirement plans. I suspect many are withdrawing money from their pensions as a last resort, but almost certainly haven’t taken the advice of their planners either. Unfortunately, this trend has many negative long-term consequences.
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Kevin O’Donnell is the editor of Financial Planning Today, where he has worked as a journalist and editor for over 30 years.