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Tony Wickenden: Advisers’ 10 most frequently asked questions

Tony WickendenThe future of paid-for advice rests in dealing with the hard stuff

There was an interesting piece recently in the Financial Times entitled “The Four Questions Financial Advisers Are Most Often Asked”. The article actually covered 10 such questions and I suspect most of them will resonate with readers.

I have a belief that the future of paid-for advice rests in dealing with the hard stuff.

I have used the term “the three Cs” to summarise the characteristics of such: namely, challenges that are “complex”, where the “consequences” of getting it wrong are financially detrimental and where you “can’t” readily self-serve the solution.

OK, I am stretching it a bit with the last one – but you get my point.

Generally speaking, people find financial issues complicated. Of course, there are exceptions and financial education will gradually increase awareness and understanding.

But despite this, the development of guidance and robo solutions, and the good efforts of the Office of Tax Simplification, there will always be scope for advisers to do good work. With this in mind, advisers’ 10 most frequently asked questions centred on the following:

  • Retirement planning;
  • Tax planning;
  • Brexit/political uncertainty;
  • Inheritance tax;
  • Future financial planning;
  • Investment returns/dividends;
  • Portfolio review/diversification;
  • Global politics/likelihood of market crash;
  • Pension drawdown;
  • Pension transfer.

The number-one concern in relation to pensions was most regularly characterised by versions of the question “can I afford to retire?”.

At one level, it’s pretty basic but at another it demonstrates how important it is that clients have strong guidance from their advisers.

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Giving clients a clear appreciation of the capital that is needed to generate a required level (and very possibly varying levels) of income is an essential starting point to illustrate the necessary seriousness of the task ahead.

Full awareness, assisted by cashflow modelling and other appropriate tools, is essential.

Building in the extent of any income likely to be generated from existing pension rights and through continuing to work will also be important in securing a clear picture of the challenges and opportunities.

The adviser’s experience and knowledge of rules such as the annual and lifetime allowances will also be essential. And this leads us to the second item: how to pay less tax. The greater a tax efficiency level, the easier it will be to achieve an investment target and lower the strain on capital in order to produce the aspired-to level of net income.

Tax planning within the boundaries of what is acceptable these days is not easy, especially as the rules keep changing. Which is why having an adviser is important.

The “what is acceptable?” context for tax planning has changed radically over the years.

As I have said before, being within the letter of the law is no longer enough.

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HM Revenue & Customs has done a good job in scaring people away from aggressive schemes with powerful publicity campaigns incorporating individual and corporate naming and shaming wherever it can.

The problem is that it has made some clients a bit too wary.

All of the main financial planning tools, products and structures currently available to responsible, informed financial planners will carry no risk of attack from HMRC.

As such, advisers have a duty to provide appropriate clarity and reassurance to their clients over what is and is not acceptable tax planning.

Just because something is tax-effective does not make it susceptible to an HMRC challenge.

Tony Wickenden is joint managing director of Technical Connection (a St James’s Place Wealth Management group company). You can find him Tweeting @tecconn



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