Self-evidently, inheritance tax and estate planning becomes more important and relevant the older clients get. But importance and relevance don’t simply auto-translate into interest and action. Even at older ages (as is the case for simple will planning) and among the wealthiest (and, in theory, most “relevant”) brackets, estate planning is something that clients will, in the main, need to be prompted about, rather than a subject they will ask advisers to address.
As for anything requiring proactivity, advisers will need to be reassured that there are sufficient numbers of their clients for whom IHT and estate planning would be beneficial, and that the time spent will be worthwhile. Furthermore, the range of potential solutions available to the sector, from investment bonds and collectives in a wide range of trusts, to business relief qualifying solutions and protection to provide for the liability of IHT, mean that the potential reward for effort is impressive.
Encouragingly, IHT and estate planning remains important to the advice proposition, with a third of advisers expecting it to become more so. Advisers also expect it to contribute a higher proportion of overall revenue going forward.
But expectation is a fairly soft (and unreliable) measure. Turning the aforementioned optimism on its head, it is worth looking back and reflecting that, compared with the last time we engaged the market, the stated importance of IHT and estate planning has dipped a touch: 63 per cent of advisers categorise IHT and estate planning as “critical” or “important” now versus 69 per cent in 2014. And there appears to be significant polarity emerging – because the industry doesn’t have enough gaps to address already!
Getting forensic, of those who currently perceive IHT and estate planning to be either critical or important, 43 per cent expect it to contribute more, proportionately, to revenue going forward.
This is compared with only 29 per cent of those who rate IHT and estate planning as less important who expect an uplift. In short, those who are already engaged are most likely to become more so, whereas those who are not, will not, or are far less likely to become so. This has two important implications:
1. If this trend carries on and the disengaged advisers continue to eschew a more structured and proactive approach to IHT planning, then there is the very real risk of significant consumer detriment in the form of sub-optimal tax plans;
2. Providers are more likely to actively target engaged advisers as the resistant (significant) minority remain unresponsive, and so, unrewarding. This, in turn, could further exacerbate the gap.
It is essential for advisers to be fully informed, professional and aware of the key IHT rules. That’s a given, but advisers also need to be convinced of the return on their investment in engaging with their clients on IHT and estate planning.
Phil Wickenden is an independent consultant