High taxation, stagnant wages and house price inflation are all challenges facing Gen Z, which is why financial education is important to help alleviate the intergenerational wealth divide.
This week’s FT Adviser podcast looked at the intergenerational wealth divide in the UK and why a lack of education in schools is a concern here.
Hereward Mills, an intern at FT Adviser, revealed between 2006 to 2008 and 2020 to 2022 the wealth gap between people in their early 30s and early 60s grew in real cash terms from £135,000 to £310,000 pounds, according to the Resolution Foundation.
The report said the increase has primarily benefited the already wealthy, with gains flowing disproportionately to older home owning families, and that since 2010 the majority of wealth increase came from passive gains, such as rising house prices.
Malvee Vaja, a chartered financial planner working within the Rathbones Advice team, who also appeared on the podcast, said there is an inequality of wealth between the older generation and Gen Z, but there is also a difference between those in the Gen Z bracket.
“At some point in the future, Gen Z are going to be inheriting a lot of money from parents and grandparents, and then you’ve got also other Gen Z clients that are just not in that position at all, that have got parents with no assets to leave behind,” she said.
“So there’s that difference as well, which I think is going to be harder with this climate where the standard of the cost of living is so high.”
Vaja added the older generation are also wary of passing down wealth nowadays due to concerns the younger generation will not know how to look after it.
“The baby boomers really do feel like they’ve worked so hard for that money, for that wealth, and they do not want to see it being squandered away by their children and grandchildren within their lifetimes,” said Vaja.
“It’s stopping a lot of people from passing wealth down tax efficiently by gifting and things like that.”
To address this, Vaja believes there needs to be better financial education in schools and for advisers to help them understand their options, includung investing and Isas.
She said: “The fear that a lot of clients have is just asking for help or asking for guidance is going to cost them money. No, it isn’t.
“If someone were to approach me and just ask me questions about what they might do, I can provide them guidance for no charge at all. It’s when I need to actually do some work for a client, that’s when charges come in.
“But if someone were to ask you about why should I put money in a pension versus an Isa, I can have a conversation with them about it.
“So don’t be afraid to reach out and get some guidance. It’s available, and any good adviser will do that for you.”
To hear more about the generational wealth divide and what this means for advising clients, click the link above.
amy.austin@ft.com
