Financial caregiving is a challenge that more advisors need to address

The number of American households with financial caregiving responsibilities is growing and is increasingly impacting younger, affluent cohorts.

But while the issue involves 36 million households out of the 131 million across the US, who are responsible for the finances of a loved one who for a variety of reasons cannot do so themselves. They might be older adults and/or those with an illness or cognitive decline.

A new report from Hearts & Wallets highlights the financial caregiving challenges for the sandwich generation – those supporting both their children and their parents – and reveals that just 16% of advice experiences, address the questions that these people have. For younger generations, it falls to just 5%. This was found in the firm’s Advice Database, which tracks market capabilities.

This huge unmet demand for advice is worsening as incidences of financial caregiving increase, not least with the move to defined contribution making retirement funding more complex. The firm’s research shows that 17% of future retirees expect to have six or more sources of retirement income, but only 8% of current retirees do so.

“Aging family members often face their most difficult life challenges when they are less able to handle finances, especially given the growing complexity of retirement finance,” Laura Varas, CEO and founder of Hearts & Wallets, said. “Support programs could aid retention, consolidation, new revenue streams, and possibly even acquisition, since a robust caregiving offering could spark trial.”

Of the nine financial caregiving responsibilities tracked by Hearts & Wallets, younger households with $3 million or more in investable assets are providing at least three. Those aged 21-50 are currently involved in the highest level of caregiving with 50% anticipating future involvement.

Wells Fargo Advisors and Morgan Stanley have the highest share of financial caregivers, 40% of the total between them.

Across all generations, most financial caregivers are managing more than one responsibility and the level of concern increases with the number of responsibilities.

Currently, 7% of households offer financial support to parents or in-laws. This support most commonly takes the form of shared living arrangements (5%), while a smaller portion (2%) provide assistance without cohabiting. Intergenerational financial support is more prevalent among Black, Native American, Asian, and Hispanic households compared to white-only households. When such financial support is given, it is accompanied by financial caregiving in 65% of cases.

For advisors and financial services firms, the biggest market for financial caregiving advice is households aged under 45 which is around 16 million while the affluence of those in the $3+ million cohort amounts to $16.2 trillion.

“In contrast to the tradition of financial caregiving falling squarely on ‘Sandwich Generation,’ these responsibilities broadly impact across all ages,” said Amber Katris, Hearts & Wallets Subject Matter Expert. “Different pricing mechanisms will be needed to address the need across asset and age groups.”