The tightening of trust and tax regulation in the UK is causing concern for advisers trying to give ...
The tightening of trust and tax regulation in the UK is causing concern for advisers trying to give advice in the area, according to Brian Murphy, senior financial planning manager at Axa Sun Life.
However, he said advisers could overcome any confusion by developing professional relationships with solicitors and accountants to help them give correct advice.
Murphy said: "If advisers want to grow business in the future they need to develop professional connections with solicitors and other professionals. Changes in financial legislation is making the world a more complicated place and advisers need to work with solicitors for clarification on any regulation changes concerning financial products.
"Clients want quality information on investment services and need to be treated fairly. With regulation constantly changing, advice becomes much harder to give. It is important to seek clarification on products from lawyers because if a client is given poor advice they are likely to sue or go to the Financial Services Authority."
One area where Murphy has seen the boundary between legal and investment advice blur is inheritance tax (IHT) planning and trustee investments, which have traditionally been a role for the solicitor.
According to Murphy, building professional contacts is even more important following complex changes to trust law announced in the Budget. He said the changes to trusts have caused confusion and put in doubt the current advice process for existing trust structures.
In the Budget, the Government announced accumulation and maintenance (A&M) and interest in possession (IIP) trusts would attract a 20% IHT charge on transfers exceeding the nil-rate band of £285,000. In addition, trusts established for more than 10 years would face a 6% IHT charge.
Murphy said: "As a result of all these changes it is difficult to do bespoke IHT planning. Product providers are undertaking due diligence and are getting council approvals by solicitors to sell products."
Other changes advisers have had to seek guidance on have been pre-owned asset tax (POAT) legislation, introduced on 6 April 2005, said Murphy. The POAT legislation imposed an income tax on people who gave away assets but continued to use them.
According to Murphy, the legislation caused confusion for advisers as it was initially unclear what trusts were affected and what would trigger a POAT charge.
He said advisers should initially develop a professional relationships with a solicitor by approaching them on trust-related issues as many were not familiar with other investments.
"For this reason the best person to target in a law firm is in probate. It is also important to make a firm aware that an adviser has professional qualifications as lawyers like to talk to other people who are educated.
"One method of targeting law groups could be through briefing sessions, newsletters and joint client seminars," suggested Murphy.
"When first approaching lawyers, advisers need to be patient as relationships do take time to develop. However, if this is done properly, there are likely to be many benefits for both parties."
As well as trusts, Murphy said there were other areas solicitors and advisers could work together for mutual benefit including divorce, conveyancing and the preparation of wills.
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