I read with great interest last weekend the new white paper produced by Fidelity International titled “Rainbow’s End”. This report surveyed some 1500 Australians over the age of 26 years from Millennials to Baby Boomers to assess their expectations, experiences and concerns with Retirement and Legacy. By way of background the “great Wealth Transfer” has started and there is some $3.5 Trillion in wealth undergoing generational change. 

Some findings were surprising, others not so. Understandably for the Millennials and Gen Y, the common responses were getting into housing, paying down a mortgage and paying for their children’s education. Interestingly, 4 in 5 people interviewed believe that sharing wealth with the next generation was important – all agreeing that the future was less optimistic. A further 3 in 5 believed they felt a sense of responsibility for managing wealth for future generations. 1 in 2 respondents who had accumulated wealth were looking to transfer 40% of their accumulated wealth while they were still alive (giving with a warm hand).

Fewer than 1 in 10 who possessed wealth have a comprehensive estate plan and while well intentioned, most indicated that they “hadn’t got around to it”. 1 in 2 respondents are unsure and not at all confident in how to go about doing this to ensure their financial legacy is fulfilled. Insights into Legacy included financial security for the creators, expressing gratitude for the family, supporting family goals, personal fulfilment, creating and maintaining a sense of purpose, and preserving family values and traditions.

The “nest egg” mentality remains firmly entrenched, with 4 in 5 people who are already retired, avoiding spending money to ensure they don’t run out of money or have sufficient to pass on to their family. Of these, the vast majority understand and appreciate that superannuation while important and necessary to fund retirement, is also an asset they intend to pass onto their family on their passing. There is a lack of confidence regarding how much money they need in retirement and how much is sufficient to deal with uncertainty and inflation. Only 1 in 7 are confident their retirement savings would be sufficient to support their desired lifestyle needs.

What this tells us is that firms like ours need to do more work identifying the retirement income stream and the capital required to produce that income stream through all times and conditions. Only then, will we truly give people peace of mind. Additionally, it reminds us that there is a great deal of work to be done on the Estate side to bring about peace of mind in this area.

Watch this space for further webinars in these areas where we can work to reduce the complexity.