As we await the outcome of the government's consultation on the transfer of funds from CTFs to JISAs, Kingston Unity's Andrew Townsley asks if advisers are ready to discuss their clients' options.
Whether a parent or grandparent, relative or friend, when considering how best to invest for a child’s future, a Junior ISA (JISA) is probably the main product that springs to mind.
The government’s consultation into the options for transferring funds held in Child Trust Funds (CTFs) to JISAs, which closed on the 6 August, is set to increase publicity around the JISA market over the coming months. Are you prepared to talk to your clients about the subject?
The outcome of the consultation will potentially have a major impact on how advisers talk to parents about investing for their child’s future. If parents are indeed going to be able to transfer equity-based CTFs into deposit-based accounts they need to be fully aware of the pros and cons of each and be encouraged to consider which option best suits their lifestyle and their hopes and ambitions for their child.
Time to act on JISAs
The move, if it does go ahead, will mean that many parents will be actively seeking advice. While they may be familiar with saving for the short and medium term, when it comes to finding somewhere to invest funds for the longer term and getting the best return possible, we believe many will want some guidance.
Bring it up
If advisers have not already done so, it would be worth raising the subject with current clients who may be affected sooner rather than later. By keeping them updated on the consultation and what the outcome could mean for them, it will pave the way for parents to come back to you when they are ready to start looking at child investment options. This is a perfect opportunity for you to start or re-open the savings discussion.
Advisers should not restrict themselves to discussing child investment products with expectant parents or those with young children either. Grandparents are also a key audience to consider, as many feel they would like to pass on a gift at, say, age 18 or 21, and turn to tax-exempt savings plans when targeting a specific long-term savings goal, such as university fees.
Also, other relatives such as uncles and aunts may wish to provide some financial security for child relatives. It is important that advisers get to know their clients’ feelings in this area so they can identify when there is an opportunity to talk about saving for a child’s specific short, medium and long term needs.
To many, the concept of paying for advice will be relatively new and, in these cases, there will be an expectation that the service provided should be even better than before. A provider should recognise this situation and support advisers in delivering the kind of service that justifies any fee.
Clients also need to be very clear about any charges from the provider, so there are no surprises when the paperwork comes through or when the plan pays out. Again, advisers need to be sure they can rely on providers for total transparency.
We would recommend researching not just product options but also the company offering them: advisers need to be confident they are dealing with an organisation with an exceptional track record for reliability, stability and consistency of rates.
In the news: Junior ISA sales up 300%
Sales of Junior ISAs have soared since their launch in November 2011. Most recent government figures, released in July, reveal 295,000 new accounts were opened in the 2012/2013 tax year with a total of £392m invested.
Duo start roles on 1 October
Where true value lies
Economy to thrive despite global risks
Behaviours, animals or something else?