Survey shows inheritance plans clash with inflation and rising costs, impacting younger investors
A Vanguard Canada survey highlights potential challenges in the anticipated ‘great wealth transfer’ of $1tn from boomer parents to their millennial children.
The findings reveal significant generational gaps in expectations and planning for wealth transfer amid rising inflation and living costs.
The survey notes that 34 percent of those aged 18-34 see inheritance as crucial for meeting their financial goals, with 61 percent indicating it is important to achieve their investing targets.
However, expectations may not align with reality. Among respondents, 57 percent of those under 35 either expect or have received an inheritance, yet 39 percent do not consider passing on their own assets a priority.
Despite 49 percent of respondents acknowledging the importance of inheritance for their children's financial future, 31 percent do not plan to or are unsure about leaving an inheritance.
This disconnect reflects the pressures both generations face from inflation and rising living costs, according to Mario Cianfarani, head of Sales and Distribution at Vanguard Investment Canada Inc.
Cianfarani stated that these factors make wealth transfer conversations challenging, but involving financial advisors could help align expectations.
Older investors, particularly those over 55, face additional hurdles. 35 percent express concerns about needing their assets later in life for healthcare, prolonged retirement, or other costs.
25 percent anticipate relying on their home for retirement income, further complicating inheritance planning.
Notably, one-quarter of respondents over 55 have no plan for wealth transfer, and only 15 percent work with financial advisors to facilitate the process. While 31 percent have discussed wealth transfer with recipients, many lack a structured approach.
The survey found that while 48 percent of respondents have some form of financial plan, only 32 percent include wealth transfer in these plans.
Financial advisors play a pivotal role, with 83 percent of investors working with advisors reporting a positive outlook on their financial future.
However, failing to involve the entire family in estate planning can lead to fractured relationships.
Research shows 70 percent of women and 66 percent of children change financial advisors within a year of inheritance events.
Cianfarani emphasised the importance of communication and trust in maintaining wealth during asset transfers, noting that advisors can facilitate meaningful conversations to improve long-term outcomes for families.
