Financial advisers are raising concerns that some clients’ wishes to gift cash lump sums to children could leave them short in later life, according to a new report from Just Group.

Advice firms reported that on average, around a fifth of their clients had already gifted money to children or were considering doing so. In about a quarter of cases (26%), advisers felt obliged to challenge their client’s wish to gift any money or to encourage them to give a lower amount.

Just Group’s research, based on an online survey among 1,000 adults aged 45 and over, revealed the top three reasons given for advisers challenging the clients’ wishes. These were because the client had not considered how long they might live and need income (67%), they hadn’t considered how they might pay for care in later life (48%), or because they didn’t have enough money to give away (40%).

The 2021 edition of the Just Group Care Report also found that four in 10 parents over the age of 45 had gifted more than £5,000 to children aged 18 and above, to help them cover major expenses such as weddings, house deposits or to pay for education.

“The Bank of Mum and Dad is very much open for business with almost all advisers (95%) having at least some clients who wish to make living inheritances to their children,” said group communications director at Just Group, Stephen Lowe.

“But with about one in four clients advisers face the tricky challenge of how to make their clients reconsider the wisdom of giving money away early.

“Advisers tend to deal with wealthier people but even so their insight and expertise means they will sometimes have to challenge a client’s plans to make financial gifts. These can be difficult conversations but advisers understand it is important they raise these concerns because their experience suggests the client may otherwise face financial hardship later.”

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