Paul Wilcox, chairman at WAY Group, on the areas of estate planning where advisers must raise their game.
There is much dust still to settle following the application of the Retail Distribution Review (RDR). Of course, the imposition of requirements for advanced qualifications was a major obstacle for many, so much so that thousands opted for deregulation and retirement.
However, the biggest cultural change for those remaining was the compulsory move away from remuneration via product-based commission. Many dyed-in-the-wool advisers have taken this move as heralding the end of financial advice as we know it.
While some products may be better ‘sold’ to clients, the industry must embrace the new environment and use it to professionalise the sector.
Time to get professional with estate planning
One of the historical problems with the delivery of financial advice is that it had remained product based rather than solution based.
In my own long lost days as an adviser, I frequently came across clients who had received good, product-based inheritance tax (IHT) advice but virtually no advice on issues such as wills, deeds of family arrangement, discretionary trusts, the plethora of IHT exemptions and opting for ownership of assets via joint tenancies or tenancies in common as appropriate.
While the product-based advice was very helpful and was often effective in mitigating tax, there were frequently sizeable, sometimes greater, savings to be had simply by clients rearranging their assets.
For years, advisers have complained of a lack of professional status but a quick scan of the other professions – such as accountancy and legal professions – clearly shows professional value comes from skill (the result of many years of study), experience and the willingness to offer sound professional advice. Only with genuinely personalised advice can an adviser be seen to be adding value and justifying their professional fees.
Areas to work on
Some of the areas of estate planning where advisers can raise their game are:
• Making their clients aware of the benefits of deeds of family arrangement. Traditionally, well-off elderly people have tended to write very straightforward wills leaving their estate equally to their children. This is a fine starting point (especially compared with dying intestate like so many people do) but, these days, children often have their own IHT problems. Deeds of family arrangement, whereby wills can effectively be rewritten (within two years of the relevant death), offer families the opportunity to skip one or more generations for branches of the family where this is useful. There is probably no product involved but the potential tax savings can be enormous.
This article continues…
Partner Insight: Continuing the Architas education series for clients.
What made financial headlines over the weekend?
290,000 already affected
Putting the tech into protection
Square Mile’s series of informal interviews