Inflationary pressures and the cost-of-living crisis are impacting how Canadian investors young and old feel about wealth transfers, according to a Vanguard Investment Canada Inc. survey.
Inflation and high living costs are forcing some younger investors to rely on an inheritance, with 34% of those between the ages of 18 and 34 stating that an inheritance would be crucial to meeting their financial goals, the survey found. Another 61% indicated that receiving an inheritance would help them achieve their investing targets.
At the same time, while 49% of respondents acknowledged that an inheritance is essential for their children’s financial future, the survey revealed that 31% did not expect to or were unsure about leaving behind an inheritance.
“Canadians of both generations, from boomers to millennials, are feeling the pressure of inflation and the rising cost of living, and this impacts the transfer of wealth,” said Mario Cianfarani, head of sales and distribution with Vanguard Canada, in a release.
“This is a difficult conversation for many people and expectations may not match reality.”
Despite many relying on inheritances, younger investors expressed mixed feelings about wealth transfers.
Among those under the age of 35 who were surveyed, 57% said they expected to receive or had already received an inheritance. Ironically, 39% of respondents in this cohort said they didn’t believe it would be important to pass on their assets.
For older investors, there are a host of pressures impacting views on inheritances.
About 35% of those surveyed above the age of 55 said they were concerned about needing their assets later in life for things such as unexpected health care costs, prolonged retirement needs and managing the rising cost of living.
The survey further revealed that 31% of respondents above 55 have discussed the transfer with the intended recipients and 15% are working with a financial advisor to facilitate the process. Meanwhile, about 25% currently have no plan.
A financial advisor can help families navigate tricky wealth transfer discussions, Cianfarani said.
The survey found that 48% of respondents have some form of financial plan, but only 32% include wealth transfer in those plans.
Among investors who use an advisor, 83% said their advisor had positively impacted their outlook.
There is a clear need for more structured wealth transfer planning, Cianfarani said, adding that advisors should include an entire family in estate planning discussions to maintain solid client relationships.
“We find that lack of communication and trust is the [No. 1] reason why families fail to maintain wealth during an asset transfer,” Cianfarani added.
“Part of the value advisors bring to their clients is helping them facilitate these conversations and this has a long-term positive impact across the entire family.”
The survey was conducted from March 21–28, 2024, among a representative sample of 1,307 Canadian investors who are members of the Angus Reid Forum. It was offered in English and French.
A probability sample of this size would carry a margin of error of plus or minus 2.7 percentage points, 19 times out of 20.