Mass Affluent Investors Rethink Wealth Strategies

The UK’s mass affluent investors are reassessing long-held wealth strategies as changing tax rules, high interest rates and growing digital confidence reshape financial behaviour.

According to Daniel Hough, Wealth Planner at RBC Brewin Dolphin, a combination of legislative change and lifestyle pressures is accelerating major shifts in how these clients preserve, protect and pass on their assets.

One of the most noticeable trends is a sharp increase in early gifting. “We are seeing mass affluent clients increasingly accelerating the gifting of assets to family and friends,” Hough says. Many are turning to trusts or family investment companies to balance two priorities: helping the next generation sooner while retaining an element of control over how assets are managed.

With Inheritance Tax (IHT) never far from the conversation, planning around it is becoming more proactive. “. There’s a growing focus on Inheritance Tax (IHT) planning, with clients favouring trusts to retain control while minimising tax liabilities,” he notes.

Interest in traditional tax-advantaged vehicles such as Enterprise Investment Schemes (EIS), Business Relief (BR) and AIM-listed shares has also climbed. But the government’s 2024 Budget has had a cooling effect. “Though BR and AIM have become less popular post-2024 Budget due to reduced relief,” Hough explains.

At the same time, some investors are rethinking pensions. Concerned about income tax and potential treatment of pension assets on death, certain mass affluent clients are diverting contributions toward alternative investment routes.

Others are turning to annuities earlier than expected. “Clients are also shifting to annuities earlier to facilitate gifting from excess income, as annuities are currently exempt from the 2027 rules,” Hough adds.

There is also a notable shift in protection planning. Many are favouring term protection over Whole of Life policies. As Hough puts it: “Additionally, there’s a preference for cost-effective term protection over Whole of Life (WOL) cover to protect against IHT liabilities, anticipating a different financial landscape in the future.”

Generational divides are widening within the mass affluent segment. Younger investors, shaped by fintech and on-demand information, have markedly different expectations from their parents. “Younger mass affluent clients expect faster access to information and are more likely to use AI tools or RoboAdvice firms for self-management,” Hough says. While this can be empowering, it can also complicate intergenerational planning, especially when families try to coordinate strategies across multiple platforms and sources of advice.

Many younger clients, facing the pressures of high interest rates and rising living costs, prioritise reducing debt before building investment portfolios. Their appetite for instant results can also clash with the fundamentals of long-term investing. “They often expect immediate and guaranteed returns, which can require education on long-term financial behaviours,” Hough notes. “While some younger clients initially attempt self-management, others recognise the value of professional advice and engage immediately for support with their own and their parents' finances.”

Not all younger clients rely on DIY tools for long. As legislation evolves and complexity increases, many choose to engage with professional advice earlier than anticipated. Some even seek guidance not only for their own assets but also to support their parents’ financial affairs.

For advisers and wealth managers, these trends highlight the need for agility: blending digital convenience with trusted long-term planning, and tailoring strategies across generations whose financial realities and expectations differ more than ever.

"Mass Affluent Investors Rethink Wealth Strategies" was originally created and published by Private Banker International, a GlobalData owned brand.

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