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Inherited Wealth

An inheritance like no other?

In this first article, “An inheritance like no other?”, Glenn Baker outlines some of the new issues facing the under 45s who collectively stand to inherit a staggering £1.2 trillion of wealth

by
Glenn Baker

in Inherited Wealth

04.02.2019

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Under-45s stand to inherit more than £1.2 trillion of wealth [1] . This inter-generational transfer of an astonishing amount of money has created a whole range of new issues that need to be managed. Charles Stanley believes this issue is so important that it is starting a debate. Tell us what you think!  

By Glenn Baker, Business Development Director, Charles Stanley

An individual’s age is one of the most common predictors of differences in attitudes and behaviours. However, one aspect that tends to unite families irrespective of the ages of its members is the ongoing stewardship of a family’s collective wealth. There can, however, be fundamental differences in outlook between family members – and this usually depends on their age and whether they are passing on, or inheriting, that wealth.

Charles Stanley has commissioned an eclectic range of articles from authors with different perspectives to explore this significant trend. It has also undertaken its own research to explore differences in attitudes, expectations and aspirations between those passing on wealth and those set to inherit. In the West, more than 75 million Millennials born between 1981 and 1997 will take over an estimated $30 [£20] trillion in wealth from Baby Boomers in the next 20 to 30 years  [2].  This is, obviously, unprecedented in scale, but it is also paradoxical in that younger generations today are in many ways rather “disinherited”.

Millennial challenges

In the UK, the average student debt is now around £50,000, compared with previous generations which received such education for free. Additionally, with high house prices locking many out of the property market (and renting so unstable) the nation’s mental health is becoming affected. No-one is saying the older generations had it easy, but there are significant new challenges facing young people today and these have only been partially explored.

Younger generations are likely to have different views of society – and the advent of social media means they are not averse to expressing an opinion. It is also arguable that younger generations are more socially mindful, with their behavioural patterns very different from those from whom they are inheriting.  

Inherent differences?

One perceived difference between the generations is that the new inheritors of today will have their lives intrinsically interconnected with the digital world. This is a type of “bonding” with technology that has never been experienced before. Indeed, Generation Alpha (a child currently aged between one and seven) will not have experienced life without access to touch-screen technology. Typically, a baby today learns to use touch-screen technology before the age of two.

Just because young people do not have the spending power of older generations, it does not mean they do not have an influence on the way money is spent. Indeed, a recent study by Loughborough University discovered that two-thirds of single people in their 20s are still living with their parents. It is likely that they, as a more digital-savvy audience, are “influencing up” older generations in the new digital economy as the generations spend more time living together. This could mean that the current (and often older) guardians of family wealth are becoming directed more and more by those who will inherit in years to come.

There are, of course, constants that run across families, such as certain values that may be shared among generations. So too is the notion of privacy, in that wealth, its preservation, who has what and who spends what, tends to be extremely personal, especially in private client practice, and so a whole industry of “data protection” is deeply rooted in social-economics.

Perhaps the new inheritors expect to interact with the world and their wealth in a different way from previous generations, and perhaps, more radically, Instagram and social media generate unrealistic expectations of relationships and of life in general. However, the jury is still out on that question. Certainly the new inheritors have lived within the ballooning of the Information Age.  

But we should also tread very carefully because of a sensitive paradox. We may live in an age where there is more access to knowledge, but that does not mean that it is peopled by those who know more. The two can be confused as the same outcome – that greater access to knowledge automatically means that there is more that everyone will know and understand – but this is not necessarily the case.

The right to choose and the challenge of increasingly-complex choices

Millennials are, of course, a generation of explorers and life seekers, they want to be a part of the world, volunteering and giving back to it. This means experiences for Millennials can be just as valuable as money or wealth, if not more so. In some ways, the Baby Boomer generation has been here before when it pushed boundaries to pursue peace and love in the 1960s – although the monetary value of their inheritance was minuscule when compared with what is predicted for the new inheritors. Nevertheless, Millennials have admirably pushed boundaries further, developing social responsibility and environmental friendliness. The new inheritors of trillions of assets over the next twenty to thirty years have, in my view, validated their right to be able to make their own choices in a way that was not so obvious for previous generations.

Having the ability to choose makes all the difference. But, here we have come full circle, in that there might be more general knowledge about “investments” and the choice that families can make when investing their wealth, but “knowing” and “choosing” may not always simply be enough.

Private-client lawyers, accountants and investment managers spend their professional lives engaged in planning, structuring, taking account of, and managing assets – as well as perhaps experiencing the inheritance of assets in their own personal lives.  Their voices, views and technical insights will be explored in this series of articles, drawn together by Charles Stanley. However, it is important to stress that there is no way that this is somehow divorced from the underlying psychological, behavioural and social aspects, which are intrinsically linked to the act of transferring an inheritance between generations.  It may appear deceptively simple for a family to ‘stage-manage’ its own inter-generational transfer – and continued guardianship – of wealth.  But the social and psychological multi-layered threads, and legal and investment frameworks, of our changing world have become increasingly complex.  These aspects too will be explored in this series, as we seek a deeper understanding of inheritance.

We invite debate on this vast subject and will be holding events to engage with various viewpoints. I hope that you enjoy the series of articles over the coming months.  If you have a particular view that you would like to share, then please do get in touch. A dialogue has to work two ways to become effective. 

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

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