One of the most extraordinary statistics this week revealed that one in four advised clients are currently helping adult children financially.
Royal London warns that while this is laudable it could affect both the children and clients in the long term. Money pulled out of pensions, savings and investment now is less money saved retirement. They have a point.
It is, however, entirely undestandable that families would want to help their less well off members if they can. It’s at least, in part what, families are all about.
It reminded me that some of the smarter planners I’ve spoken to over the last few years are increasingly moving towards becoming ‘family’ advisers, not just advisers to a couple or an individual.
This makes a great deal of sense.
Family finances are inevitably enmeshed, whether families like it or not. Inheritance is an obvious area plus of course the obvious desire to help get offspring on to the increasingly expensive housing ladder.
Most accommodation in the UK, either rental or purchase, is way too expensive and it’s a moot point whether, without the help of the ‘Bank of Mum and Dad’, whether many younger people could get on the ladder these days. That’s an issue for another column.
In the meantime planners will increasingly be called on to help other, less well off family members. I’ve certainly heard of many offering pro bono advice to students and younger offspring to help them take their first steps into saving and planning for retirement when they begin work.
And I’ve heard several instances of grandparents being brought into the Financial Planning mix. It all means more clients for planners although there is probably a point when advising too many family members without sufficient fees covering the cost becomes an unprofitable exercise.
The other trend the Royal London survey highlighted was the trend for older adult children to live with their parents. A lack of suitable affordable accommodation is probably to blame here but it would be shame if we end up with large numbers of single 40-year-olds living with Mum and Dad, unless that was by choice rather than the only way to afford a roof over their heads.
Royal London says its research suggests some people are also taking a chunk out of their pension specifically to help their children. We have also seen suggestions this week that some company pension scheme members are quitting to save money. Both of these are regrettable.
With inflation still high people need more than ever to be invested as much as possible in pensions to ensure their long term retirement plans are not blown off course. I suspect many are pulling money out of pensions as a last resort and almost certainly without advice from a planner. A great pity and a trend with many negative consequences for the long term.
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Kevin O’Donnell is editor of Financial Planning Today and has worked as a journalist and editor for over three decades.
