Paul Kennedy

22 July 2010 | By Gregor Watt

Tax is a very serious issue for Paul Kennedy. As director of tax and trusts for Fidelity International, his job is to develop insights and understanding of the UK tax system for advisers and the public. But he concedes that it can be a subject that most people find a little dull.

He says cheerfully: “Tax is boring but it is our job to make it more interesting.”

Kennedy is on a mission to help people understand the tax system and he says the public’s aversion to tax can be an advantage to IFAs.

He argues that not only can IFAs capitalise on the public’s aversion to tax and lack of understanding but by putting tax at the centre of an IFA business, advisers can also develop a much stronger business proposition.

He says if clients simply see their IFA as a fundpicker and the fund falls in value, they can question the value of the advice but if they can see the tax they can save, the value of advice is obvious, regardless of investment performance.

“What I am trying to do is get people to understand the importance of this subject, to move away from a productoriented ’should it be a bond or should it be a collective?’ point of view and understand that financial planning includes tax planning. It is not just about investing.

“An observation I would make on my time in the industry is that 99.9 per cent of the time is spent on looking purely at the investment side. It is a great starting point and you should spend a lot of time but, as a financial planner, you should understand that the tax planning that goes with that investment is hugely important and that is where the IFA adds value.”

He says if IFAs can integrate tax planning into the heart of their businesses and demonstrate the financial value this brings clients, they have a service that clients will value and pay a fee for.

“Tax frightens the public, it frightens some IFAs, but with proper tax planning, you can genuinely add thousands of pounds to your end-client.”

He says this added value will help IFAs justify the fee that they will have to charge after the RDR but says this is only workable if IFAs can do the research cost-effectively through the use of technology and the resources that he is helping to develop at Fidelity.

“Its no good adding thousands of pounds to your clients if you have to charge your clients thousands of pounds to delivery it,” he says.

Kennedy is no stranger to the IFA business and should know what advisers need to run their firms. He entered the profession on the bottom rung after leaving school and spent years working at “the sharp end of the business” dealing face-to-face with clients.

Although he still enjoyed the business, in 1996, he decided to take a career break to study law and train as a barrister. He was called to the Bar in 1999 and as he had been specialising in tax and trust law, he found himself up back in the financial services industry, although this time on the provider side.

“One of the great things about taking a career break and going to study when you are a little older is you are little more formulated about what you enjoy and what you don’t enjoy. There is no doubt that I knew I loved the law but when I was at university and training to be a barrister, the areas of law I really enjoyed were tax law and trust law, most of the areas that most other students absolutely hated.”

After stints at Norwich Union and Prudential, helping each company develop and market their trust proposition, Kennedy joined Fidelity in 2007.
He is in charge of developing a range of trust options for Fidelity as well as heading the development of tax planning tools and education but he says working for an asset management business, particularly one with an investment platform, means he can be product-neutral and his focus is to ensure clients are using the most appropriate tax wrapper for their investment.

Isa, pension, insurance bond or collective, Kennedy says he has no agenda to push. As investment platforms are taxwrapper-neutral, Kennedy says it frees him to look at the tax issues without having to put emphasis on one particular product. “If you have an agnostic proposition, that is a support service rather than a product flogger, then it really allows one to do justice to tax and trust planning because you do not have a vested interest to flog a particular product or talk one down a little bit.”

Kennedy is in the middle of a series of IFA roadshows, which were supposed to be on the Budget changes but, with the changes to personal tax much less dram-atic than had been feared, particularly the changes to capital gains tax, Kennedy says, in the case of investment, not much has changed.

“The upshot of all the analysis I have done, including dividends as well, so not just capital growth, is that prior to the Budget, the collective was the most efficient wrapper for equity and capital growth-based investments both for higher-rate taxpayers and basic-rate taxpayers and it remains so.”

Kennedy says trying to second-guess future Government plans is now harder in trying to balance the demands of the two coalition parties. “You have got the Tories who are historically the party of low taxes and you have got with them in coalition a party whose policies I would describe as being slightly left of the Socialist Workers’ Party. It is going to cause some interesting dynamics.”

However, there is one prediction that Kennedy is confident of making.

“Taxes have got to increase. Twenty per cent of this deficit repayment is going to come through increases in tax. There are not enough cuts yet, there is not enough increase in tax to pay off the deficit. It is inevitable that taxes are going to increase - we just don’t know where and we don’t know when.”

If the rates do go up, then there will be plenty to keep Kennedy occupied and if his mission succeeds, there will be plenty of opportunity for IFAs to cement their relationship with their clients.

“The nature of tax planning is that when taxes are increasing, the hard cash value of tax planning rises.”

Born: Norfolk
Lives: Norfolk
Education: Thorpe Grammar School, University of East Anglia (law), called to the Bar (Lincoln’s Inn)
Career: 2007-present: director of tax and trust planning, Fidelity International; 2003-2007: head of taxation and trusts, Prudential; 1999-2003: head of technical support, Norwich Union; 1996-1999: career break to study law; until 1996: IFA (various roles)
Likes: Integrity, sincerity, straightforwardness aND chocolate
Dislikes: Pretentiousness, hidden agendas, incompetence and vegetables
Drives: Audi A6 estate
Book: Nature’s Building Blocks: An A-Z Guide To The Elements by John Emsley
Film: The Godfather parts 1 and 2
Album: Brandenburg Concertos by JS Bach or Café del Mar volume four
Career ambition: To see a financial services industry of which we can be truly proud
Life ambition: To try and enjoy each and every remaining day
If I wasn’t doing this I would be..Training a small string of racehorses, running a small vineyard or teaching scuba diving somewhere in the sun

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