Fidelity FundsNetwork has launched a tax wrapper anaylser in a bid to help advisers assess which tax wrappers best suit their clients' investment needs.
The tool is designed to assist the recommendation process by allowing the adviser to run various investment scenarios based on user defined inputs.
Differing taxations of a mutual fund, onshore bond and offshore bond are built into the tool, which gives the adviser the information necessary to establish which wrapper potentially works best in each scenario, FundsNetwork claims.
Its launch follows a FundsNetwork survey, which suggests 99% of advisers believe understanding tax wrapper allocation and the appropriate use of insurance bonds and mutual funds is essential to providing proper investment advice.
Research also found three quarters of advisers are not satisfied with information provided by life companies on the topic.
Paul Kennedy, head of trusts and tax planning solutions for FundsNetwork, says, from a tax perspective it is clear certain assets work better with certain wrappers.
“This important choice can make a difference of up to 70% or even more, on the client’s investment return. Tax planning has to be an integral part of investment advice.
“It does not compromise the client’s choice of investment, it simply ensures that having made an investment choice, the ultimate return can be maximised by using the appropriate tax wrapper.”
According to FundsNetwork, the tax wrapper analyser:
- Has no built bias towards one particular wrapper and lets advisers analyse a whole portfolio, part portfolio or a specific fund or asset class
- Takes into account asset allocation, investment return assumptions, investment duration, regular withdrawals, CGT exemptions, current and future personal tax rates and wrapper charges
- Shows results relative to tax efficiency for each wrapper for the combined asset classes and is broken down to provide the wrapper efficiency for each asset class
- Allows for examination of a potentially more efficient portfolio by using multiple tax wrappers
- Has the ability to analyse the results for ‘what if’ changes to personal tax rates, investment term and regular withdrawals.
The tool can be found here.
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