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The Heat is on

Aaarrggggh. Yet more technical papers that must be read. I don’t know about you but my pile of reading is nearly reaching the ceiling.

Now that pension simplification is with us and we have familiarised ourselves with the implications for financial planning, it is time to catch up with the non-pension technicalities that surround us.

It is tempting to pick up Heat magazine rather than wade through all the information surrounding Ucits III, the introduction of real estate investment trusts and Mifid, plus the pages and pages covering Treating Customers Fairly.

This is a hard decision for a busy woman who has an IFA business to run. Once I have read about Britney’s latest baby, I attack my reading pile and on the top is the information surrounding the Budget clampdown on the use of trusts to mitigate inheritance trust. This is the biggest change to IHT over the last 20 years.

Paymaster General Dawn Primarolo claims that “only a tiny fraction of the wealthiest top 1 per cent of the population” will be hit. This figure is on the low side. The Association of British Insurers calculates that over one million trusts and 4.5 million people will be affected.

For those of you who have been out of the office for the last few weeks, in very broad terms, the trust changes mean that all new interest in possession trusts and accumulation and maintenance trusts will be treated as discretionary trusts, where a 20 per cent set-up charge is taken, then a 6 per cent charge on the value of the trust assets above the nil-rate band every 10 years. This puts trustees and beneficiaries in a less advantageous position than originally advised.

The unexpected Budget announcement of the changes, with all the technical nuances, have made it complicated to provide advice to clients about estate planning. No wonder there has been such confusion over the advice that should be given to clients currently holding and wanting to hold assets in trust.

With half the population not trusting financial services companies, this can only contribute to a lack of confidence among the people affected by the changes announced. It takes the intellectual heavyweights like Mr Woolley and Mr Jelley, who both have lovely surnames which would not be out of place in Mr Men books, to explain to us all what these changes mean.

Now is the time for the techies to be heard and to explain the trust changes in language that clients understand. At the time of writing, only a handful of companies have gone to press outlining the changes to their trust wordings.

The techies also need to make available information on the new investment product offerings, particularly in the property fund area where we will see hundreds of new funds coming to the market in the next few months.

Global property funds may look attractive but how do you talk to clients about the commercial property market in China or the housing market in New Zealand without detailed information from the fund provider and its property advisers?

I was recently handed internal research on property funds from a major fund provider and the only details listed were the size of the funds but not where or what they invested in. Clients always ask where their money is being invested.

Clients need to be treated fairly and, as Robert Reid says: “How about treating advisers fairly?” Companies need to produce the information that IFAs want, not what they think we need.

The fiefdoms of influence on the financial services industry need to work together so that those who speak to the public daily about their finances – IFAs – are able to provide proper advice. Combined with quality input from the techies, this might help to shape a bright future for the industry.

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