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Trust in me

IFAs need to link up with solicitors to make the most of changes to the Trus-tee Investment Act. After nearly 30 years of being stifled by out-of-date investment restrictions, trustees will soon be given the “general power of investment”.

They will have the freedom to make investments as if they were entitled to the assets of the trust. The changes to the 1961 Act were passed at the end of September and look set to come into force next spring.

The act previously gave trustees potential for return – but only without taking undue risk with the trust capital. As a result, investments were divided into two main groups: narrower range investments, mainly fixed-interest securities, and wider range investments, consisting mainly of shares (subject to restrictions) and authorised unit trusts.

The act stipulated trustees must put 25 per cent of the capital in the safe narrower range.

As these restrictions are going to be lifted, trustees will have the freedom to invest more adventurously and can access other products such as life policies and bonds, without taking unnecessary risks.

Under the previous act, there were several cases where trustees were accused of not looking after the interests of the beneficiaries. Trust funds have been left in bank accounts without any effort being made to increase the capital and beneficiaries have successfully sued the trustees. However, the changes seek to ensure trustees can no longer neglect their responsibilities.

From next spring, trustees will have to obtain advice before making investments and when reviewing the trust.

An exception to the rule is given if a trustee “reasonably concludes that in all the circumstances it is unnecessary or inappropriate to do so”. But it is unlikely trustees will want the trouble of justifying why they chose this option.

The act will also stipulate trustees should only be people believed to be qualified to give advice through having an ability in, and practical experience of financial and other matters relating to investment.

The act only applies if trustees are not given investment powers when the trust is drawn up. Many trusts will not be affected by the new rules. However, there are still trusts that adhere to the rules and trusts automatically generated by a person dying intestate are also affected.

The trust fund mar-ket has not traditionally been available to IFAs. Under the rules, capital has mostly been invested in gilts and equity-based investments. Solicitors requiring assistance with these investments generally turn to stockbrokers.

Rather than accepting the present situation, IFAs are taking the opportunity to fight for a share of this new business.

The market will be opened for other investment opportunities and IFAs need to convince solicitors that they are the best people to give this advice. IFAs need to establish relationships with solicitors and work with them to create the best funds for the trustees.

Many solicitors are likely to be sceptical about working with IFAs and tend to assume they are only concerned with selling. Establishing a fee-based scheme might be one way to diminish these fears.

Even if the new rules fail to bring in a great deal of business, forging links with other professionals will help them understand the role of an IFA and is likely to lead to other business opportunities.


Norwich & Peterborough – Spanish Fixed Rate Mortgage

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Clariden Bank – Clariden Luxury Goods Equity Fund

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Woolwich – Guaranteed Equity Bond

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Time to stop the salami slicing on tax relief

Steve Webb  – Director of Policy and External Communications As the Autumn Statement approaches, Steve Webb calls for the Government to stop tinkering with tax relief. Twice a year, in the run-up to the Spring Budget and the Autumn Statement, we face a torrent of speculation as to what changes the Chancellor might make to […]


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