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The cutting pledge

Here are my final 10 New Year resolutions to boost financial advisers’ businesses in 2007.

Last week we got to number five in my top 10 New Year resolutions for financial planners.

One of my resolutions was not to go to the North-west for away games played in the late afternoon or evening – and look where that got me. The telly was not as good as being there but it wasn’t bad.

Anyway, enough basking, it could all have changed by the time you read this. I had better get on before an article about New Year resolutions looks very tired and irrelevant – a bit like the author. Self-deprecating or what?

6 Know all there is to know about the role of the private residence in financial planning.

The purchase of a residence, whether a first-time buy or a dream home, is often an incredibly emotional and fraught experience. Making it all possible financially through the provision of funds has high value attaching to it.

It is in facilitation of the purchase of a home that many long-standing and mutually-rewarding relationships are formed.

Advice will also be extremely relevant to those considering their property as their pension. However, the dangers of over-reliance on a single asset class, even when that asset class is property, must be made clear.

The practical difficulties also need to be considered when the property is one’s private residence. There is equity release but, if ever advice was needed in an area, equity release is it.

Maintaining our chronological approach, there is inheritance tax. Residential property is probably the single most important reason for the increase in the IHT yield. The increase in property values has been aided and abetted by hard legislation on lifetime giving, such as the gift with reservation provisions, the pre-owned assets tax and the more recent extension of the IHT relevant property regime to all trusts except bare trusts and trusts for the disabled.

As if all that were not enough to give advice on, there is the purchase of a second property. Being a know-all about financial planning with residential property is no bad thing.

7 Be an “in” and “at” retirement specialist. Most accept that this aspect of financial advice will be highly valued. You can give your clients more options for how to withdraw benefits by considering wrappers other than pure pension wrappers at the point of investment, where appropriate.

I stress where appropriate. But, subject to the ability to use tax-free cash from pensions, it is hard to go from a pension wrapper to a non-pension wrapper once you have accepted the “king’s shilling” in the form of initial tax relief.

Test yourself. Could you clearly articulate the currently available “at retirement” options for all your clients?

8 Use the Isa season to demonstrate your full bandwidth of financial planning skills.

These could include:

– How to protect Isas from IHT with protection plans in trust. Isas cannot, of course, be assigned and so cannot be made subject to trust.

– How to go beyond the Isa and still achieve taxfree returns using taper relief and the annual capital gains tax exemption in connection with an investment in collectives.

Just consider that if the annual exemption were £12,000 after 10 years, you could make a gain of £20,000, reduce it by 40 per cent taper relief to £12,000 and it would all be tax-free. A couple could make twice as much between them.

Consider the Suggs approach to Isa planning – one step beyond Isa … it’s madness.

Then there is the “children’s Isa”. Impossible, in fact, but designating non-Isa funds for children or holding them in bare trust for children can achieve a similar outcome. Such trusts will usually be at a level below which they have adverse IHT consequences if a bare trust for a minor is a settlement for IHT. This, of course, is the latest HMRC view which is still under review at time of writing.

The next two New Year resolutions are purely motivational so get positive stuff up and running for 2007 and go for it.

9 You are what you know so know more.

This is very simple, this one. Commit at least 30 minutes a day to knowing more about more – provided it is relevant to what you do, of course.

I once heard a now retired life company chief executive extol the virtues of a constant expansion of what you know in your field. “Know more and more about more and more,” he said. “If you do not, you are in danger of knowing more and more about less and less until you know everything about nothing.” There’s something in it.

10 Be proactive.

I have to be grateful to Steven Covey for this one. This could even be the springboard for another number-based series of articles, this time involving seven things – all habits.

But it has been done before and very, very well at that. Have a great year. I am off to sharpen a saw or two.


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