MARK COLEGATE: Hello and welcome to Akademia. I’m Mark Colegate and in this learning unit we are focusing on intergenerational wealth planning in association with Charles Stanley. Before I come to the learning outcomes, let’s meet our panellists. They are Tsitsi Mutiti, Investment Manager at Charles Stanley; Danby Bloch, Head of Editorial Strategy at Platforum; and Sean Osborne, Group Head of Sales at Charles Stanley. And now let’s have a look at our learning outcomes: how to assess and respond to client vulnerability; how COVID and its aftermath have impacted on intergenerational wealth transfers; and how client expectations of advisers are changing. Well, Sean Osborne, we’re going to be talking around the Book of Stories 3.0. What is it, what’s the research behind it, where does it fit in with some of the previous work that you’ve been doing and we’ve been discussing on Akademia?

SEAN OSBORNE: Yes thank you Mark. So Book of Stories 3.0 is our latest part of research around the subject of intergenerational wealth planning. Now this is the third in the series, as the title gives away, and this really started back in 2018. Late 2018 we were seeing lots of messages around the great wealth transfer and intergenerational wealth planning was sort of gaining interest from advisers. So what we did is we actually commissioned a white paper in conjunction with Platforum called the Book of Stories. And the purpose of the Book of Stories was we felt that clients really connected with stories when they were described. And it sort of depersonalised some quite sensitive issues that often come up around intergenerational wealth planning. The research went down tremendously well with advisers, but then of course we had the global pandemic and that sort of changed everything as COVID did.

So we commissioned another piece of research to look at how that had changed client attitudes and the impact of COVID on intergenerational wealth planning, and then what we wanted to do was sort of finish off the trilogy with our latest piece of research looking at it again once the pandemic had sort of passed and we were now into a clearer sort of looking future. Of course what we didn’t sort of put space for was a global financial crisis kicking in at the same time, which has obviously happened at the start of this year, and it kind of really impacted some of the research that we’ve seen also as well around areas like client vulnerability.

MARK COLEGATE: Danby Bloch as head of Editorial Strategy at Platforum you’ve obviously been involved in the research. How would you say the world looks different now when it comes to intergenerational planning and dealing with clients, just what are some of those headline differences that you found?

DANBY BLOCH: Well, I think the pandemic was something of an inflection point in the whole business of intergenerational planning. I think that people looked at their families, they looked at themselves, and they started taking their families even more seriously than they had done before. I think this whole intergenerational planning movement has been slow to develop. A lot of talk has been going on about it, but during the pandemic I think people got to know and value their families even more, and think about them and think about the relationships that were important to them and why family was important to them. And then of course since the pandemic we’ve had this extraordinary turbulence in the markets caused by the upsets of various currencies, including the war in Ukraine, and we’ve now got the inflation as well, and I think that’s causing people to think yet again and differently about the way in which they do their financial planning.

I think people feel just generally, not just very vulnerable people, but generally more vulnerable, more open to the possibility that things can go wrong and they need to think some more about where they are and what they want to do. So they need advice even more.

MARK COLEGATE: Tsitsi, is that sort of mirrored in your experience, because you’re dealing with clients day to day, again how has some of those conversations changed between now and say if we’d had this conversation in 2018/2019?

TSITSI MUTITI: Yes sure I mean I think what Danby said is hundred percent correct. Our conversations have shifted from focusing on performance, you know, the type of investments that we’ve made, what structures we’ve built to really doing a deep dive and understanding the structure of someone’s family, who are the key stakeholders, and also clients coming to us and saying they are concerned about the next generation but also concerned about themselves and will they be able to retire for instance, should they maybe hold off retirement, you know, the younger generation are struggling to get on the housing ladder for example, how can they help their children or grandchildren? And these are conversations that we’re having more and more.

Sometimes initiated by us because of the environment we’re in but a lot more I think clients are coming up with those questions. And so we’re having to find a way of meeting the needs of various stakeholders and bringing more people into the conversation, with the backdrop of what’s going on at the moment, you know, rising inflation, people feeling more vulnerable than ever before because of the pandemic and just the world changing so rapidly in the last three years.

MARK COLEGATE: Well, you’ve mentioned client vulnerability and intergenerational relationships. In terms of other headlines though, has the relationship, Sean, between advisers themselves and their clients changed at all over this period?

SEAN OSBORNE: Yes absolutely and that was one of those sort of key findings that came out of the third piece of research in the Book of Stories is there’s almost a new client contract that’s been written at the moment. One of the things that we obviously saw from the pandemic is clients moved very quickly and meetings with clients move very quickly to a virtual environment, and then they’ve come back to face to face. But whilst the number of advisers and investment managers are dealing with their clients now going forward in a face-to-face environment again, and we’ve moved somewhat back from the virtual environment, clients are seeking more contact than ever before. So we’re actually finding this hybrid sort of environments working very strongly where there may be the same number of physical meetings with a client going forward each year, but what’s actually happening is the number of virtual meetings in between is far greater than it ever was.

Clients generally are looking for more contact and more reassurance. There’s real concerns around risk that was coming through, and remember this paper was conducted, the research for the paper was conducted prior to what’s happening now, we’ve seen in Europe and the onset of the real spikes in inflation, and even then clients were feeling more vulnerable but also adverse to almost risk as well. So seeking greater reassurance, seeking more advice and also looking for greater levels of contact with their advisers to really help them navigate through their sort of financial waters.

MARK COLEGATE: So those were so those key themes from the Book of Stories. So Tsitsi if I start on vulnerability, you’ve mentioned it there, how do you define vulnerability and how easy is it to spot as an adviser?

TSITSI MUTITI: So what is vulnerability? Vulnerability is essentially when someone due to their personal circumstances is especially susceptible to harm, particularly if a firm is not taking acceptable levels of care, and that’s essentially what the FCA defines vulnerability as. So how easy is that to spot? I think it has become very difficult. In the past it was really, you know, people were looking at the age of a client. That was kind of the litmus test, how old is this person, what is their health situation etc. And now we’ve realised through the research especially that vulnerability can really filter down to even younger age groups. So we’re looking at young people who are carrying debt, for example, how are they going to be affected by the changes in the economy and the world; then there’s the obvious older age group thinking about their care costs and retirement needs, but also wanting to support the younger generation as well. And then there’s some of these hidden scenarios that you can only pick up through interacting with your clients, so for example mental health issues. They’re not visible on paper or when you look at a client.

So it’s really about having those deep conversations and listening to what clients are saying, and really actively listening to what they’re saying and asking those prodding questions. If something in an adviser’s mind kind of goes off as an alarm bell, maybe just digging a bit deeper to make sure that you’re not missing anything.

MARK COLEGATE: And Danby, to some extent is this emphasis on vulnerability, is this because, one, we’re perhaps not as well off as we were 12 months ago, if there’s inflation, stock markets are falling, so part of this is, if you thought you were worth £100, you’re now worth £80, and is some of this as well because people are just more aware of how precarious life can be. You know, we’ve been running through a very long bull market, everything seems to have been pretty rosy. Perhaps people haven’t been aware of risks.

DANBY BLOCH: Yes I think both those points are right. The environment has changed quite significantly, and people both at the time of the pandemic and subsequently now the turbulence that we’re all experiencing feel generally more vulnerable. I think also that advisers rightly are aware that there is a regulatory impetus here as well. Consumer duty is on the horizon, coming in next year we’re told, possibly, probably. But there’s also the issue that the FCA have been on about vulnerability quite intensively for several years now. So that’s pushing advisers to think harder about vulnerability. And I doubt if there’s an adviser company in the country that hasn’t thought to some extent about vulnerability. The difficulty I think to some extent is that people tend to think in clichés: if you’re old, you must be vulnerable, if you’re young, you’re probably all right. And OK with age does come vulnerability very often, but very often young people are vulnerable.

People who run businesses are going to be especially vulnerable right now. And they’re going to be worried quite considerably and they’ll be looking to their aged parents, maybe, or other relatives to bail them out. Well that makes two lots of people who are vulnerable: worried parents, concerned people running businesses, also people who are worried about becoming redundant. Lots of different things are making people more vulnerable, worried about whether they can pay the mortgage, whether they can afford to carry on paying school fees or even eat or go on holiday quite as much as they’re used to go on holiday. All these things are adding to the feeling of vulnerability that advisers really need to pick up on. They need to be sensitive to.

MARK COLEGATE: Sean?

SEAN OSBORNE: Absolutely and I couldn’t agree with you more, and the research really did sort of highlight this in the Book of Stories 3.0. Over 90% of the advisers we researched identified clients said that their clients were more vulnerable now than they had been in the previous 12 months. They identified this growing vulnerability coming through. And interestingly what you say as well there were some real age subsets that stood out, and one of those was 25 to 34. So if you think if you’re in that sort of late 20s/early 30s trying to buy a house, trying to start yourself going forward, job security’s probably not what it was prior to the pandemic, and yet the pressures around inflation and getting on the housing market have just pushed all that again much further away and could push it out of sight. Those short-term vulnerabilities are the ones that I think advisers really need to be aware of.

As you say the cliché is often if you’re old you’re vulnerable, if you’re young you’re not. I don’t think that can be pushed forward now with advisers. They’ve really got to think outside the box and ask some quite deep questions of their clients to truly understand the vulnerabilities within the family dynamic, which fits into the intergenerational wealth transfer piece as well. Because the vulnerability may be on the 30-year-old desperate to get on the housing market, but actually the donor can’t actually afford to make a financial contribution to support them at this period of time. And that sort of moral obligation that they feel is quite a heavy burden on some families.

MARK COLEGATE: Well, just on that point, Tsitsi, when you’re talking with clients, how do you sort of marry up whether this sense of people’s social expectation and obligation actually fits with the amount of capital they’ve got behind them to deliver and how do you have that conversation?

TSITSI MUTITI: It’s a very difficult one to have with some clients. But I think one way of getting around it and getting the message across is, you know, as I mentioned listening and understanding what are the reasons behind this desire to support the next generation or whoever it is that they’re looking to support, acknowledging that, but then also using hard facts. Things like cashflow modelling and just talking through the numbers as well and showing the reality on paper but also trying to see how you can meet them or how you can phase some of this giving for instance to the grandson or the child who wants to get onto the property ladder or may be facing some sort of redundancy for example. It’s really also about having a joined-up conversation with both parties so everyone understands why maybe this course of action is more appropriate than maybe a husband and wife handing over cash to a son or a daughter, maybe phasing it out over time.

But it takes time. And I think for advisers what we are learning more and more is to be patient with clients because these are emotional topics. And it’s also about showing these strategies in different ways, you know, having that conversation but also playing it out on paper, and I think one thing that we need to really focus on is understanding that not everyone is a numbers person, so sometimes you do need to use graphics and colour and those sort of things to get the message across. But I think having all stakeholders around the table or the virtual screen, as it may be for some families, is really important.

MARK COLEGATE: Thank you. And Sean just on this point, because I think we’re moving across to sort of intergenerational wealth planning a bit more broadly, as you mentioned it was a theme in the original Book of Stories, when we did our original piece on this two, three years ago. What would you say are some of the things that have changed, some of the dynamics that have changed within wealth transfer over the course of the last couple of years?

SEAN OSBORNE: One of the things that’s certainly not changed is the interest in it, and the advisers working within this area have recognised that actually the intergenerational wealth transfer continues to be an area of great interest with clients. I think what’s changed is the conversations are happening, where perhaps two, three years ago they were happening less frequently, they’re now happening more frequently. I think actually COVID has helped support that, because we saw during COVID a number of meetings taking place in a virtual environment, where it was easier to get family members together, to get the generations in a room together because of the lack of requirements for travel etc. And actually a number of our advisers through the research reported that the conversations seemed to flow much better in a virtual environment with a generation of family members, as opposed to being in person, simply because I think people felt a little bit more relaxed in their own environment and being sort of almost separated from being in the same room as the individual they’re having a conversation around.

So I think what’s happened is the understanding’s improved and got a lot stronger. The conversations are happening a lot more. The generational conversations continue to be challenging for some families. And I don’t think that’s changed completely, but I think advisers are far more equipped to deal with those conversations now than perhaps what they had been in the past. And that was our original thoughts around the Book of Stories. The purpose of Stories was they were a great way to demonstrate how you’ve helped other clients in similar situations with similar challenges. But it depersonalised it from being this is how I would help you directly and it made it food for thought for clients and really engaged the clients to open up and really sort of say well actually I’m concerned for these reasons, whether that be gifting too much and what that would do and the impact that would have. This sense of fairness through the family was always a huge one, if you’ve got multiple children that you wanted to gift to, the sense of wanting to treat them equally was something that really shone through. And it was just a way of helping engage advisers with their clients in a deeper more meaningful way than perhaps before, and that’s a key sort of theme that we saw come through.

MARK COLEGATE: One of the statistics said that caught my eye was I think some 25% of advisers say their clients need to support family, with clients saying they need to support family members is rising up the clock. Sorry let me say that again. OK. One of the statistics that really struck me from having a look at the Book of Stories was that 25% of advisers say clients need to support family members, or that clients claiming they need to support family members, that’s rising up client’s agendas. Is that a case, Danby, of money needing to go to care costs, so it’s supporting the elder generation, or is that more the elder generation being desirist of leaving money to the next, because there’s two ways that money could…?

DANBY BLOCH: Yes I think it’s both ways. There are huge differences in the conditions that clients find themselves in. There’s the cascading down the generations argument, which I think is the mainstream argument, but there are also families where the younger generation are in effect paying for the older generation’s care. And the older generation’s care has come very sharply into focus in the pandemic when people were dying, when there was a greater than ever focus on what was happening in care homes. So I think that has been something that’s happened.

I think there are other things also that have happened. I think particularly now with markets going somewhat into reverse - I think somewhat into reverse is a fair comment - the temptation to sit back and say well gosh how well we’ve done for you by way of investments, there’s going to be slightly more challenge and challenging over the next few months. And advisers might do well to look for some of the outperformance in tax terms. And helping clients to save tax is certainly something that will be moving up the agenda to some extent I think. But also I think that this sense in which there’s going to need to be, mutual obligations will have to be satisfied, helping out people, helping out younger generations who are getting into financial difficulties and also helping out older generations who need their care paying for, in both ways immediate needs will become higher up the priorities for many clients, many families.

MARK COLEGATE: Sean?

SEAN OSBORNE: Yes and that’s absolutely right. And one of the things we really focused on through the Book of Stories, one of the themes that came out was this question around when a gift becomes a loan. So when you actually gift through the generation but, you know, for like expectancy reasons and also for the reasons you’ve mentioned, everyone wants their parents now to have the best possible care as they get slightly older, and if they are going to a care home you want to make sure it’s the one you’re selecting and it’s a good quality. Well that then suddenly can quite quickly turn that gift into a loan again where you’ve got to help fund that to look after your parents in their later years. And I think that’s a concept that was never thought of prior to the pandemic when we were going through the intergenerational wealth discussions, it was always the money flowing one way, which was through the generations from the eldest to the youngest, but I think that reverse could quite quickly happen. Especially as mortality continues to improve in the UK and we see people living longer but perhaps in not quite so great health in the latter years.

MARK COLEGATE: And just a final question on this, Tsitsi, as you’re talking with clients I mean we’ve had this period where now the quite high levels of inflation, what sort of impact does that have on the discussion, is there a fear if I don’t make a decision now, the money I’ve got to hand over’s going to be worth less in six months, less in 12, and also again to this point about markets having gone up a lot, I’m sure over the last few years people, even when bad things have happened, this idea that the market will chunter out a return of 8 or 10% a year has been pretty much fitted as standard even when times are tough. And I get the feeling that that might not be what people’s expectations are going forward. What does that do to the conversation?

TSITSI MUTITI: Yes it really does shift the conversation a lot and I think the biggest shift we’re seeing is having conversations with multiple people about a specific account or an amount of wealth rather than one person. And, as Danby and Sean have mentioned, thinking about all the different stakeholders and yes we’ve got high inflation today but, you know, David who might inherit in 20 years, how will it impact him between now and 20 years when he inherits, you know, but then also thinking about the parents now and potential care costs. So if they are already paying care costs now, how can we manage these portfolios and their wealth so that they can continue having that standard of care and living that will keep them going until they’re no longer on this earth.

So it’s really shifted the conversations in multiple ways and I think for advisers what we’ve seen is it’s really important to work together. We don’t have all the skillsets and more often than not bringing in other advisers into the conversation with a client or the family actually unlocks quite a bit in terms of the conversation but also bringing up these solutions that are kind of relevant for this particular time and also reassuring the client and their family.

MARK COLEGATE: Given what you’ve been discussing, are you finding clients now have different expectations of what they want from you as an adviser?

TSITSI MUTITI: Certainly, yes. As people evolve, you know, their needs and their needs evolve, yes they are expecting a lot more from us. They’re expecting, Sean mentioned it earlier, more contact. And clients who may have been reluctant to speak to us in the past, I am certainly having conversations with those clients now more and more, which is actually a good thing but definitely more contact. A lot of clients are asking for referrals if we know someone who can, you know, do we know a solicitor that we can refer them to, because they might want to set up a trust, or an accountant if it’s a business person, you know, thinking about how do they unwind, a specialist in terms of unwinding their business and unlocking value from that which that they're - and then we’re talking about how do we pass it on to the next generation, so financial planners as well.

So everyone needs to kind of work together; we can’t do it on our own to service a lot of the wealthy clients. So that demand for access to other advisers is become more and more important for clients. The communication, you know, always being able to talk to someone, whether it’s for reassurance or just to get the numbers, and then ability to be able to talk across the generations as well.

MARK COLEGATE: And Danby, when you were putting the research together, did you see that reflected in some of the statistics and observations that came back from the advisers you were talking to?

DANBY BLOCH: Yes I mean the first Book of Stories was particularly interesting because there we focused on Charles Stanley advisers, who have a remarkable ability many of them to have managed client money over four, five, six generations, which is pretty remarkable. And the premise of that research was that our advisers generally could learn from much of the experience that Charles Stanley advisers were able to pass on. And then we did similar thing with a bunch of other advisers outside Charles Stanley for the Book of Stories 2. And we learnt an awful lot about particular techniques of suggesting loans rather than gifts for example, ways of looking at clients and thinking about them and being alert to things that might arise.

One of the interesting things I thought was the way in which a lot of advisers who are successful in this area have been able to unlock the reticence that is the secrecy even in so many families about family wealth. I mean it’s very easy for somebody who’s in the younger generation in their 20s, 30s to think oh well old grandpa’s going to survive for a bit longer, but when he falls off the twig we’ll get lots of money, and maybe he’s good for some money now, in a sort of unfeeling kind of way. And when they get to understand in broad terms what grandpa’s situation is and might be and what the considerations are, not necessarily with huge amounts of detail but with a broad picture of it, they get to understand that actually they don’t want to deprive grandpa of all this money, or grandma, because they’re going to end up having to support them later on. Or there’s the danger of that happening, and that they absolutely don’t want to do.

So silence and reticence is something that advisers need to play around, talk around very carefully because it is very sensitive stuff, but there’s a lot of benefit to be derived from these sorts of family groupings that one can have now. And of course with the new technology that becomes a great deal easier.

MARK COLEGATE: Sean, just before I bring you in, on just this side of the emotional side, Tsitsi, how do you stop some of this stuff corroding relationships within families?

TSITSI MUTITI: Very carefully! I think it really all boils down to knowing your client and understanding each individual over time. Taking a very measured approach with the conversations and I think we’ve mentioned it earlier using some of the tools that are available and showing the hard numbers, because sometimes not everyone can understand the theory from talking, some people need to see it down on paper, showing the different scenarios which cashflow modelling can do easily. But as Sean mentioned and what we tried to do with Book of Stories 1 is sharing stories, you know, similar families going through a similar scenario, similar dilemmas, this is how they got to their solution for their situation. And then I think that kind of, you know, a lot of people relate to stories and then people start thinking about their situation and often, more often than not they come up with a solution and we’re just there to make it happen. But it does happen gradually over time. So the more you know your client, the more of a deep dive you do in terms of conversations, I think the easier it becomes.

MARK COLEGATE: Sean?

SEAN OSBORNE: Yes and, sorry, Danby mentioned earlier when he was talking about the new found sort of appreciation I think for your families since COVID has come through, and it’s made some of those conversations easier because I think there’s a far greater respect now across the generations since the pandemic’s come through to actually really understand it from both sides. So you will have grandparents that on the face of it may be particularly well off, but also you’ll have the next generation down possibly don’t want to take that inheritance. They would rather it move into their own children and almost skip a generation for tax planning purposes that you mentioned. And also for the concern around taking money away from their parents, they quite easily know that their parents may well need at a later stage in their life. And so I think that respect now is growing. But it all comes back to conversations.

It’s having these deep conversations across the family. And it’s not just a conversation. I don’t think you can turn up and do this in one go, it’s a number of conversations really drilling our specific areas, and bringing the family in to get an environment where it’s safe to have these quite open and often quite exposing conversations with your nearest and dearest, and I think that’s something that we’ve really tried to help advisers with. And that also leads us into vulnerability, and both those short-term and those long-term ones, because it’s very often then that people really do discover things from their own families that they weren’t quite aware of because we often don’t talk about our illnesses or our woes or our ways.

MARK COLEGATE: Well, Sean, a final thought, there’s obviously a lot to talk about. There’s a lot we haven’t talked about, we could go into in more detail. So in terms of next steps, if you’re watching this and you think right I need to find out a bit more about this, I need to take deeper dives into client vulnerability, intergenerational wealth planning, thinking about what my relationship with my clients is and should be, what should you do?

SEAN OSBORNE: Yes so we’ve got, following this, which is now closing off the Book of Stories, we’ve got three deep dive sessions coming on webinars that we’re running over the next few months which focus in on practical guides to dealing with three key areas that have come up from the Book of Stories, the final iteration of the Book of Stories, and they do focus on vulnerability, the intergenerational wealth planning and sort of how practically advisers can enter into this market or improve their skills when they’re operating with it. And then finally that client contract, what we’re calling we’re framing in Charles Stanley the new client contract. So how are we dealing with clients going forward, what are the clients’ expectations and how as an adviser can you adapt your business to really suit the multi-generations and the new client sort of focus that’s come through, where expectations are different to what they were pre-pandemic. And certainly if you go back to when we started the Book of Stories in 2019, what seems like quite a long time ago, the world has moved on quite fast and I’m sure it’ll continue to do so and we want to support advisers in those areas.

MARK COLEGATE: We have to leave it there. Sean Osborne, Danby Bloch, Tsitsi Mutiti, thank you very much for joining us. Do have a little look below the player, we’ve got a link there to the Book of Stories 3.0, from all of us here goodbye for now.