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Richard Leeson

You might say Government financial services legislation in the recent past has not exactly done the IFA community any favours. For example, on the personal investment front, a couple of years ago we witnessed the replacement of Peps with Isas. The fact remains that the structure of most Isas certainly leaves little scope for IFAs to run a successful business from this means alone. The same is true of stakeholder. After a long and winding road of consultation, the final legislation may have left many IFAs wondering where to turn for future business growth and how to adapt their businesses accordingly.

The good news is that the last few years of Blair culture (and, before that, the Conservative administration) have had a positive impact on the UK investment market. Diminishing state retirement provision has engendered a whole new popular awareness of the need to invest for the future and provide for future generations. In addition, as a result of sustained economic growth, we are now seeing another important effect of the policies adopted by successive Governments since the early 1980s – the rise of the mass affluent within UK society.

Traditionally, the mention of private wealth prompted us to think of the archetypal landed gentry – those estate-owning, tweed-sporting, fox-hunting aristocrats who had inherited their land and other assets from their ancestors, whose wealth was locked in their stately homes or spoken for by Lloyd&#39s. Now we are seeing the rise of a new and different high-net-worth investment culture which the IFA community should seriously switch on to at a time when their traditional business streams are under threat. The difference between this new type of investor and the traditional high-net-worth types previously mentioned is that these are individuals who have created their own wealth rather than inherited it. As a result, their attitude and approach to investment is radically different.

These investors are likely to be much younger and more information-hungry than their traditional counterparts – and more willing to take independent financial advice. They may have earned their riches through sporting or celebrity achievements as well as through entrepreneurial skills. It has been calculated that, by 2005, there will be five million people with £50,000 or more to invest. Emergent wealth will outstrip inherited wealth in the UK.

The emergent high-net-worth investor demands quality financial advice but is happy to pay for it if he considers he is getting value for money. IFAs looking to access this market can rely on sales and marketing support from life offices with approach letters and advice on how to reach this type of client. The emergent wealthy require sophisticated investment solutions. Many will be seeking to minimise their income and capital gains tax liability. In this case, an onshore or offshore insurance bond might represent an attractive option. It is worth remembering that offshore investment is one area where IFAs still enjoy exclusive distribution and is likely to provide good growth potential.

If individuals are approaching retirement age or wish to plan for future generations, inheritance tax planning will be central to their plans. Providing guidance on tax planning and trust structures represents an important way for IFAs to add value in terms of personal service to clients.

Who wants to advise a millionaire? Anecdotal evidence suggests a client bank full of high-net-worth individuals is something almost every IFA would love to achieve. Wealth trends provide an opportunity to make this a reality.

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