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Tony Wickenden: Tax in the headlines is good news for advice


Over the past few years, tax has been big news. It has had to be– the Government has needed to cut the debt and increasing the “revenue line” through increased taxation and tougher anti-avoidance measures have been two “must do” activities.

The newspaper headlines have reported a hit to headline rates (notably the 50 per cent – falling to 45 per cent – additional rate) and also by “headline acts” apparently intent on avoiding tax on a large scale, to the outrage of The Times specifically and the general public, well, generally.

At the time of writing this article, tax is also making headline news again.

This time it is largely in connection with the LibDem conference and the calls of Messrs Clegg and Cable for the introduction of some form of wealth and/or mansion tax as a condition to “signing up” for any further cuts.

Vince Cable has also, it seems, called for greater action to be taken to prevent tax avoidance by non-domiciliaries. He has used the provocative/bordering aggressive “sunny places for shady people” to describe low/no tax offshore jurisdictions.

And Danny Alexander, LibDem chief secretary to the Treasury, has announced a substantial “beefing up” of the so-called Affluence Unit at HMRC with a view to imposing greater scrutiny of the tax affairs of the “affluent” defined, initially, as those with wealth in excess of £2.5m but extending to those with wealth (including residential property) of over £1m.

This proposal in relation to the Affluence Unit is about scrutiny, though, not any change to tax rates or the introduction of any new taxes for the targeted groups of taxpayers.

So how much does all of this tax publicity and tough government action impact (if at all) on what consumers, potential buyers of financial advice and financial planning, want and expect from their financial advisers? And perhaps more important, how does it influence what they will pay for?

This is important as what consumers will pay for must be at the heart of the business modelling of all financial advisers. There is no point offering services that are not valued and will not be paid for.

Perhaps, unsurprisingly, the latest (and excellent) JP Morgan research on this topic reveals that consumers are more likely to pay for proven expertise in areas they perceive as important and areas in which they (the consumers) believe that they have less expertise/competence than the advisers they might seek advice from.

With the increasing perception that you can find out anything you want by “googling” it is especially important that advisers focus on the areas of financial advice that demand greater expertise and where the consequences of “getting it wrong” are quite significant in terms of increased risk or lost/reduced opportunity.

In many cases, it will be necessary for advisers to legitimately “sell this fear” so that their clients understand the value that advice can bring.

It seems that one of the areas for advisers to concentrate on, being one to which consumer value is attributed to advice on it, is taxation and tax planning.

According to J P Morgan:

  • 62 per cent of 55-64-year-olds are worried about tax

  • 69 per cent of those with £100k-£150k investable are worried about tax

  • 57 per cent want financial adviser input to minimise tax

  • 21 per cent cite estate management/planning as a concern and 66 per cent of those say they would want professional advice

So, this combined with the finding that “consumer recognition of the limits of their knowledge” and “awareness that the adviser has expertise that the consumer doesnot and cannot readily access by googling” would seem to augur well for tax planning under adviser charging.

And there is a good degree of interest in it – no doubt helped by the constant publicity – with tax planning being perceived as relatively difficult, important and, done well, something worth paying for.

It is important in promoting the value of the tax planning function within the overall financial planning process, for advisers to be aware of the current “zeitgeist” that appears to be heavily stacked against anything other than the “centre ground” of tax planning. But that still leaves plenty of scope for planning.

Tony Wickenden is joint managing director of Technical Connection

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