Should you share a financial advisor with your partner or family?

New research shows that one in three families with financial advisors use them to solve money issues across generations.

Of those who do, 57 percent share the services of a counselor with their parents — including biological, step- and adoptive family members — with 65 percent of the grandparents, and 34 percent with their partner’s parents. with father.

According to a study of Intergenerational Planning and Wealth Transfer Between Families advised by M&G Wealth, a third of those who share a mentor with a parent or grandparent pay their bill separately.

Transfer of wealth: Many families who share a financial advisor say one advantage is that it ensures everyone is treated fairly

Since many people turn to advisors or financial planners, which they pass on to younger members of the family, this can be a sensible approach and something that we see more of in the future, especially with older generations having assets. Considering the amount of assets.

However, there are disadvantages as well as benefits when sharing a financial advisor, especially if a family ends up with similar financial products or providers.

We look at these below, and round up the views of financial experts and advisors—one of whom says that if you share a firm’s services, it’s reasonable to ask for a family discount on the fee.

Why do families share a financial advisor?

Some 38 percent of people who have a financial advisor in their family believe it ensures everyone is treated fairly.

According to the M&G Wealth Survey, 37 per cent believe it is an advantage for everyone in the family to be aware of each other’s financial status.

Some 35 percent say the practice saves taxes, and 34 percent say it helps younger family members and supports older generations as well.

When it comes to how people feel about a financial advisor in the same way as the rest of their family, 37 percent say they are comfortable because other members trust them, and 34 percent are happy that everyone. The finances are in one place and they can review them together.

However, 33 per cent say they want boundaries and will not share all their details and status.

Justin Modrey of Candidate Financial Advice: ‘If some of the advisor’s recommended investments turn sour, it could affect the whole family’

Vince Smith-Hughes, director of specialist business support at M&G Wealth, says: ‘Our research indicates that families feel happy talking to a mentor who knows them and who they can trust.

‘Many of the families we spoke to are also investing in each other’s financial futures, with about a fifth of grandparents paying their grandchildren to get financial advice.’

M&G Wealth offers a restricted advisory service, focusing on a limited selection of products and providers, rather than the full range like an independent financial advisor. It also has an independent consulting arm, Sandringham Partners.

The firm surveyed 2,000 adults who have personally received financial advice in the past five years, or have a parent or grandparent who has done so.

Henry Tapper, an influential finance industry veteran, says it’s a standard prospecting tool for advisors to become advisors across generations, and some would work hard to get access to all members of wealthy families.

“It can’t be denied that making good advisors can work by reducing tax bills, reducing the cost of replacing assets, and making sure everyone gets the same,” says Tapper, president of industry networking platform PensionPlaypen. Singing from the hymn sheet has a way of aligning the interests of each generation.”

‘Problems come when the psalmist favors the counselor rather than the family.

‘For many families, there is secrecy that makes it a struggle to employ the same counselor. Add to this the risk of centering decisions around a mentor’s “best ideas” and you can see why families have to work hard before putting their nest eggs in one basket.

Tapper also questioned how many wealthy clients ignore the ‘concentration’ risk of facilitating a consultative one-stop shop, saying: ‘It all seems a bit far-fetched to me.’

Potential pitfalls of sharing a mentor with your family?

– If you have investments, your portfolios may be very similar or with similar providers and therefore the risk will not be widely spread.

– A mentor may not be good or even bust. Make sure it is at least authorized by the Financial Conduct Authority – check its register here.

– Different generations may lack trust or may be reluctant to share full details about their finances and their partners, who do not want to reveal the information to their in-laws

– There may be some financial issues where there is a conflict of interest between generations or siblings, causing conflict even for the advisor, as they may have to take sides or fail to solve the problem.

The issue of who pays for advice can be a fraught one, and can play into any conflicts of interest, especially as the advisor will know who is paying the bill.

What is a Financial Advisor?

‘Using a “family” financial advisor makes sense, provided the advisor is good with competitive fees,’ says Justin Modrey, director of Candidate Financial Advice.

‘However, use a counselor whose advice is poor and/or expensive and you risk inadvertently causing pain to the rest of your family.

‘In practice, child or young adult mentoring on modest monthly savings is unlikely to be cost-effective. If their needs are simple, going straight to a low-cost investment platform may prove to be a more viable option, unless their parent’s financial advisor includes additional advice within what they already charge. ‘

Modrey adds that where a financial advisor runs his own investment fund, or recommends a similar portfolio across the family, there’s a risk of having all your eggs in one basket.

‘If some of the advisor’s recommended investments go bad, it can affect the whole family.’

He also makes a counter argument, that it is ‘healthy’ for family members to make independent decisions regarding their finances.

‘This can include discussion with any current family counselors, but then to get a feel for which path you are most comfortable with compared to others.’

Regarding fees, Modrey says: ‘Pay close attention to what each advisor will charge and the service they provide in return. That way, if they decide to use a family counselor, it’s because they made an informed decision, not because Mom or Dad told them.

‘Finally, where a consultant deals with more than one member of the family, ask them to reduce their fees to reflect any increased competence compared to caring for unrelated clients.’

Alison Trehrne, a chartered financial planner at Shore Financial Planning, says: ‘It often follows that once a relationship is established with a parent or grandparent, their child also becomes a client.

‘Trusted recommendation is even more valuable in families. We treat each of them as individuals with their own objectives/plans, but it helps the consultant to create an inter-generational plan for the family to function, although with confidentiality as agreed with each member is expressed.

‘I would even go as far as to say that it is a pleasure and a privilege to manage the family estate and I am sorry that I will not be around forever to see some generous, forward-thinking plans come true.

The “pay it forward” approach is a poignant thing to see in families.

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