Financial advisers are finding themselves obliged to challenge some clients’ wishes to hand cash lump sums to children over concerns gifting money early will leave them short in later life, according to new research from Just Group.
Advice firms reported on average about a fifth of their clients had already gifted money to children or were considering doing so. In about a quarter of cases (26%) advisers felt obliged to challenge their client’s wish to gift any money or to encourage them to give a lower amount.
The top three reasons given for advisers challenging the clients’ wishes were because the client had not considered how long they might live and need income (67%), they hadn’t considered how they might pay for care in later life (48%), or because they simply didn’t have enough money to give away (40%).
The research found that four in 10 parents aged 45+ had gifted more than £5,000 to children aged 18+ to help them cover major expenses such as weddings, house deposits or to pay for education.
Stephen Lowe, group communications director at Just Group, commented: “This is the ninth in our series of reports which digs into the understanding and attitudes of over-45s towards adult social care, and for this edition we shone a spotlight on parents’ desire to give ‘living inheritances’ and how advisers manage this.
“The Bank of Mum and Dad is very much open for business with almost all advisers (95%) having at least some clients who wish to make living inheritances to their children. But about one in four clients advisers face the tricky challenge of how to make their clients reconsider the wisdom of giving money away early.
“Advisers tend to deal with wealthier people but even so their insight and expertise means they will sometimes have to challenge a client’s plans to make financial gifts. These can be difficult conversations but advisers understand it is important they raise these concerns because their experience suggests the client may otherwise face financial hardship later.
“Once again, our report shows low levels of engagement with care planning. Around four in five (77%) over-45s agree they have not thought about care, planned for it or spoken to family about it.
“There are a variety of reasons people give for not thinking about care, ranging from it being too depressing to plan (28%), it costs too much to think about (12%), that they are too young (17%), the system is too confusing (8%) or that they are waiting for the government to clarify its reform plans (12%).
“With promised reforms failing to materialise, advisers remain at the front line of encouraging more people to prepare for potential care costs, giving them peace of mind and saving them from what can often be a brutal shock of having to access very expensive professional care in later life.
“The government really needs to address this issue because people who aren’t prepared can create extra costs for the public purse in terms of extra pressure on the health service as well as pressure for families trying to look after them.
“It is time our leaders had the political will and courage to act. It is time to ‘Get Social Care Done!’.”