Type: Aim portfolio management service
Aim: Growth and the reduction of potential inheritance tax liability by investing in Aim stocks
Minimum investment £100,000
Charges: Initial up to 3% to cover IFA commission, annual 1.5%
Commission: Initial up to 3%, renewal 0.25%
Tel: 020 7523 4509
Collins Stewart’s Aim Portfolio Service is designed to reduce potential inheritance tax liability and provide capital growth.
Origen Financial Services technical director Bob Perkins feels this product is suited to high-net-worth clients who are prepared to accept a high-risk strategy on part of their portfolio in exchange for the potential tax saving on their estate on death.
“With the recent changes that have occurred in the IHT planning arena, this type of product offers a further planning option that is removed from the issues that surround and complicate the use of trust-based IHT solutions,” he says.
Perkins explains that the manager invests at his discretion in a portfolio of Aim shares. After two years the shares qualify for Business Property Relief from IHT if the investor dies. “With Business Property Relief currently at 100 per cent, the investor can remove a tranche of their portfolio from the IHT net altogether at around one third of the time that they would be able to do so with a PET,” he says.
Perkins also notes that in addition to business property relief from IHT, the investor can benefit from business taper relief from capital gains where assets are sold within the service.
“The charges appear to be competitive and the IFA remuneration is not out of step with similar services that manage portfolio’s of collective investments,” says Perkins. He adds that the initial charge reflects the commission paid to the IFA and the annual management charge includes the renewal commission.
“Though formal valuations are produced half-yearly, the provider encourages close contact with investors and face to face meetings where necessary,” says Perkins.
Perkins thinks there is not much to dislike because the service is similar to other discretionary management offerings.
“The success of this type of product is obviously in its ability to at least preserve the capital value of the investment and deliver the tax savings at the time that they are required, subject of course to any changes in legislation that may affect them. Advisers would need to look closely at the manager’s processes and pay attention to the stock selection and monitoring of shares to ensure they retained eligible for business property relief,” says Perkins.
He suggests competition will come from Close Fund Management’s Inheritance Tax Service, which has a four to five- year track record.
“There are other schemes in the market place that seek to take advantage of business property and agricultural property relief and with the position in relation to gifts into trust having become more complicated, this may be a potential growth area,” he says.
Although these plans comply with the requirements for securing business property relief, given the Government’s attitude to tax avoidance and their need to raise revenue, Perkins thinks they could become a target for change in the future.
He concludes: “This type of plan has proved to be successful in saving Inheritance Tax and is very much worth consideration as part of an IHT planning exercise.
However, the investment risks associated with AIM investments may be higher than most individuals are prepared to take, even with the prospect of a 40 per cent tax saving. The IHT saving is one reason for investing but it is not the sole reason and advisers should ensure that their clients fully appreciate the potential downsides.”
Suitability to market: Average
Investment strategy: Average
Adviser remuneration: Average