View more on these topics

Action stations

On the economic front it looks like being a difficult year, according to most commentators. We certainly seem set for a tough time. Does this mean, for financial advisers and product providers, that it is not worth trying because nobody will have the confidence to transact financial services business? Certainly not.

Encouraging your clients to take action will undoubtedly be harder but, while investment conditions may be tough, it does not mean that the basic need to provide for one&#39s future financial independence is in any way diminished. The truth is that the need to self-provide has substantially increased. Financial paralysis is not an option.

Advisers will need to ensure their clients have sufficient anxiety about this most important of financial issues – providing for their financial future – to take action.

They are getting plenty of help in this quest for anxiety creation from the press but this may still not be enough to spur individuals and businesses to take action. Specific oneto-one communication is necessary. If that communication comes from a trusted source and is in the context of a valued relationship, the message is more likely to have an impact but you need to take the initiative.

As well as being inspirational, your messages will need to be carefully crafted, based on fact and speak to the specific needs of the particular person or group of persons they are communicating with, if they are to have impact. Careful segmentation of your clients and the selection of key messages that reflect the particular needs, aspirations and attitudes of clients stand the greatest chance of delivering the right results for you.

Especially in times like these, the investment message is a particularly difficult and complex one to communicate so that action is taken. You should perhaps concentrate on ensuring that clients are best positioned for the upturn (whenever that may be).

Perhaps by focusing on minimising tax as a means of improving returns, the adviser has a chance to play to his or her strengths. “Oh yes,” I hear you say, “I knew it would not be long before tax came up.” Well, yes, of course. Seriously, though, where the most suitable investment portfolio for a particular client or segment of clients is relatively unadventurous or where the investment is guaranteed, securing the most favourable tax outcome through careful choice of a wrapper may be the most important means by which to secure those extra percentage points on the bottom-line return.

After all, if one wrapper produces taxable benefits and another does not, then, assuming the returns and charges are identical, your client will be better off with the latter. It stands to reason, doesn&#39t it?

The value of advice in this process is paramount and the ability to give good advice will come from the adviser&#39s knowledge and understanding of the tax consequences of the investment wrappers available.

These will include approved and unapproved pensions, collectives (onshore and offshore), Isas, insurance products (onshore and offshore) and portfolio management/wrap services. Understanding the tax consequences of all these is essential to being able to make the right choices for the client.

My point is that if market conditions are dictating that significant numbers of investors are choosing particular (and ultimately similar) investment portfolios where the emphasis is substantially on risk minimisation, then the choice of a wrapper to maximise the bottom-line benefit by minimising tax can be a significant differentiator.

This is not to say that there will be no value to be gained from the choice of investment portfolio or that there is no choice – there is. It is just that, if the general caution that abounds effectively limits the scope of choice of underlying investment, it may pay advisers to concentrate on adding value through tax planning. After all, an additional £1 of net return is an additional £1 of net return, regardless of whether it comes from superior investment returns or tax saving. In this context, the use of trusts may also come into play as an effective means of adding value and improving returns.

Another obvious area for an adviser to add value in a way that is not sensitive to investment conditions is in assessing the need for and then putting in place “catastrophe” funds to meet the basic financial needs of individuals, their families and their businesses.

Life insurance has a unique role to play here but the choice of the right policy/policy mix and, where appropriate, the right trust is another area where trusted expertise is essential.

So, here are two reasons to be cheerful for advisers in what promises to be a hard year.

First, focus on having an understanding of tax as a means of differentiating the effectiveness of financial solutions.

Second, go back to basics and ensure that all your clients have at least their fundamental financial needs covered for events such as death and critical illness. That is – or should be – essentially the bedrock of financial planning for most individuals and businesses.


Incentives needed for low-paid savings

The majority of IFAs see more generous financial incentives as the best way to get the low-paid saving, says research from Axa.Increasing tax to pay for improved state pension provision was rejected by 68 per cent of IFAs, with 63 per cent saying the best way to address the pension funding crisis is to increase […]

Popplewell leads Zifa roadshows

IFA technical doyen Keith Popplewell and Zurich IFA Group are teaming up with a series of exclusive initiatives targeted at intermediaries.The initiatives include a series of seminars, a CD-Rom package and the launch of two websites – IFAsite and – both available free to IFAs through Zurich.IFAsite provides a template to help IFAs build […]


“Absolutely not. I am an IFA and I find them hard enough. The man in the street will not be capable of using them to the degree that he would need to be able to.” Leon Pownsey,Independent Financial Solutions “No. They do not seem to have worked for stakeholder. People still need advice.” Anthony Malone, […]

FSA can see the wood for the trees

In last week&#39s Money Marketing editorial leader, the FSA was accused of being somewhat presumptuous in publishing its discussion paper on the options for regulating the sale of simplified investment products (DP19).Paraphrasing Ms Piggy, presumptuous – moi?This article sets the background to DP19 and answers the questions – Why now? Why the three options we […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm