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Web&#39s wonder

In recent weeks there has been a flurry of new web-builder services aimed at the IFA market. Over the last 12 months, the internet has expanded phenomenally as a business tool. More and more people&#39s first impressions of a company are from its website, with many investigating an organisation&#39s credentials online before contacting them in person.

IFAs are likely to be rushing to sign up to a service which offers to put them on the web. Many have a clear idea of the way they want their business to develop but some just do not want to be left behind. The danger is IFAs will leap into expensive deals with website developers without thinking about the kind of site which will fulfil their needs as the market changes. IFAs should ensure the content of the site reflects all that new technology has to offer.

One key concern is the possible negative effect that the predicted “stakeholderisation” of products will have on business. With a future likely to see not only Cat-standard Isas and mortgages but also pensions and even life insurance products, it does seem we are entering the 1 per cent marketplace.

The low commission margins on products mean IFAs need to change their ways of selling such products to maintain the viability of their businesses.

Any website should have a facility for researching and transacting this commodity-style business online. The business can be written ina cost-efficient way either by the adviser still acting as intermediary or using his website as the much talked about “virtual IFA” to allow the client to transact the business themselves.

Fears that allowing clients to transact directly over an IFA&#39s website will lead to the erosion of the IFA industry are largely unfounded. The public already has the opportunity to buy products online from some direct providers and can get good-value products from execution-only discount brokers and research products using infomediary sites. Offering similar services on an IFA&#39s website is not putting anything new into the marketplace and is helping to keep these services within the IFA arena.

A virtual IFA element to an intermediary&#39s website should be viewed as an opportunity. Statistics show only 5 per cent of eligible customers consult and transact business through IFAs, which means a potential market for financial advice of 95 per cent.

Research on views on polarisation shows only a small minority of the public has a concept of independent financial advice, which can be addressed by the effective marketing of low-cost easy-to-use IFA websites. Larger-scale intermediaries such as Charcol Online are introducing people to the concept of choice in their mortgage provision. This can only be good news for IFAs in the longer term.

Recent research from Prospektus shows only 1 per cent of financial product owners were comfortable with getting information on the internet and making their own decision. This especially holds true for more complex products, where the vast majority of people will feel more comfortable with face-to-face advice. The website, however, could easily be the route by which such people come into contact with that particular IFA.

To attract and maintain higher-net-worth clients, an IFA&#39s website would also benefit from up-to-date financial data and market reports.

Further reasons for existing and potential clients to visit the site could be the addition of regularly updated share price information and even the ability for people to buy and sell shares via the site in real time.

Information on upcoming IPOs and the ability to register for shares in popular flotations would also prove a very popular draw for high-net-worth clients.

Consumers are becoming more financially astute, having more information available than ever before. To have such information on their IFA&#39s website can only serve to enhance the image of the adviser&#39s knowledge and professionalism.

Advances in technology are not something which IFAs should be afraid of as those who embrace them whole-heartedly will find they are empowered and able to take their business forward in a more satisfying direction. For example, the development of product research technologies has allowed IFAs to cope with the demands of polarisation and increasing regulation by offering information from the whole product market.

There is no doubt that new online technology will change the IFA marketplace, reducing the reliance of advisers on commission-based business. But the same technology will enhance the abilities of those advisers prepared to change to meet the challenges by giving them the tools they need to offer highly professional fee-based financial planning.

Fully interactive IFA websites should be as far from the old fashioned static poster sites as can be imagined. They will provide advisers with a superior way of servicing clients, allowing them to take care of straightforward business online which will give them more time to dedicate to complex cases and comprehensive planning and by so doing increase the profitability and efficiency of the company.


SRCE: Money Marketing

PDAT: 061000

SCTN: Taxation money marketing

PGNO: 64


HDLN: Value judgements

SBHD: how to value an estate in the fifth of a series of articles aiming to help IFAs with IHT



There are certain situations that do not happen in the ordinary run of events but we still need to know about. Simultaneous gifts are one such example.

If the inheritance tax payable on two gifts depends on the order in which they were transferred, the Capital Taxes Office will take the order that produces the lower charge.

Apart from this, if two gifts are made on the same day, they are generally treated as one big gift. Should inheritance tax be payable on these gifts, for example, because of death within seven years of a potentially exempt transfer, then it will be apportioned between the gifts (see table right).

Where a lifetime gift is made on the same day that death occurs, it is treated as the last lifetime gift. This may affect who is actually liable to pay the tax although it will not change the overall tax bill.

Transfers that are not treated as gifts include premiums paid to an own-life policy in trust for fellow shareholders or partners as part of a commercial and reciprocal arrangement.

Death on active service

Where a member of the armed forces dies as a result of a wound inflicted, accident occurring or disease contracted on active service, his or her estate will be exempt from inheritance tax. Death resulting from an existing problem which is aggravated by active service could also trigger this exemption.

Simultaneous death

The Law of Property Act 1925 states that if two individuals die simultaneously with no means of telling who has died first, the younger is deemed to have survived the elder. The position in Scotland is governed by the Succession (Scotland) Act 1964 and is slightly different from the rest of the UK.

However, to prevent a possible double tax charge, they are both deemed to die at the same time for inheritance tax purposes.

How is property valued for inheritance tax purposes? The value of property transferred is the reduction in value of the donor&#39s estate. The value of the property is generally taken to be its open market value, that is, the best price obtainable on the open market.

In valuing property, you must take into account related property such as that in the estate of a spouse. This can inflate the value of shares, for example, where a married couple each have a minority holding but together they hold a majority.

Normally, the estate is valued immediately before death. There are, however, two exceptions:

Where something is included in a person&#39s estate on death which was not there beforehand, such as where an employer makes a gratuitous payment to personal representatives on an employee&#39s death.

Where the value of an asset changes because of death, such as where the death benefit of a life insurance policy is greater than the surrender value immediately before death or where, in a small company, the share value could be depressed on the death of a key person in the company.

In both these circumstances, the value taken is that on death.

Certain liabilities such as mortgages or funeral expenses are deductible when valuing an asset.

The value of an asset can fall between the time when it is given as a potentiallyexempt transfer and when it becomes liable to inheritance tax or additional inheritance tax because the donor has died within seven years of the gift. Similarly, the value of a legacy can fall between the date of death and the time the benefic-iary actually receives the asset. The Inland Revenue is nothing if not fair. In many circumstances, the lower figure can be substituted.

Lifetime gifts

The person liable to pay the tax can claim for the lower figure to be used. This relief can only be claimed if the recipient still owns the asset or it has been sold and the sale was at arm&#39s length.

Falls in value after death

Quoted securities and land are included in an individual&#39s estate at death at their open market value. If, however, these assets are sold within a specified period after death at less than the value used in determining the inheritance tax liability, the person paying the tax can claim relief.

Quoted securities include those quoted on the Unlisted Securities Market, authorised unit trusts and investment trusts.

The person who pays or has paid the tax can claim the relief. A claim can be made for this relief where:

An interest in land has been sold within three or, in some cases, four years of death.

Quoted investments are sold within 12 months of death. However,any claim will cover all securities sold within the 12-month period, not just those realising a loss.

Unit-linked life insurance single-premium bonds are not treated as quoted securities so cannot benefit from this relief.


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