GBI logo

How knowledge of tax-efficient investments can help generate new business

by | Nov 4, 2020

Share this article

A recent report from Fidelity1 finds that more advisers are looking to take on new clients than before the coronavirus pandemic, with 77% now saying their firm is looking to add to its client bank.

But how easy is it to find quality clients in the current climate? And are there untapped opportunities that you could unlock through engaging your existing clients?

This article looks at how a thorough knowledge of tax-efficient investments can help advisers generate new business in their existing client bank, by spotting investment solutions that can address clients’ tax planning problems.

 
 

And if this is something you would like to explore in more detail, Octopus is holding a special online event on Thursday 5 November that does exactly that.

Make estate planning part of your growth strategy

In particular, Business Property Relief (BPR), a longstanding relief from inheritance tax, has an important role to play in helping some clients who may be reluctant to start their inheritance tax planning to take the first steps.

Towards the end of 2019, Octopus commissioned a survey of advisers in which nine out of ten respondents said their clients are increasingly reluctant to give up access to capital as part of their estate planning.

 
 

Where estate planning conversations have stalled because of concerns over access and control, bringing up BPR can be a useful tool to move the discussion forward. Even if a client doesn’t ultimately choose to make a BPR-qualifying investment, hearing that estate planning doesn’t necessarily mean losing control of their wealth can help a client engage with the topic.

While it won’t be the right solution for every client, a BPR-qualifying investment can be a good option for a client with large sums they need to plan for, but who is reluctant to do anything irreversible, and who is happy to take more investment risk with their wealth in return for the benefits that tax relief can bring.

Because the investment stays in the client’s name, if the investor’s situation changes and they need access to their funds, they can request to sell down some or all of the investment, subject to liquidity.

 
 

You might get referrals from your existing clients

While we’re on the subject of estate planning, you’re probably familiar with the idea of using a family tree as part of the fact find. This is where you and your client draw their family tree, so you get a full picture of who’s connected to them and how your client’s planning affects them.

This helps make the planning ‘real’ for your client, bridging the gap between the cold, numbers-driven world of cash flow modelling and their emotion-driven life goals.

It can also be a good opportunity to start a conversation about estate planning, and potentially get referred to other family members. Here’s an example of how that might work when dealing with a high-earning client who is still of working age. It involves asking two indirect questions.

The first is: “Might you need to help your parents in any way?”

This reinforces the idea that planning is something with real world consequences. It also usually receives the response that no, the client’s parents have plenty of their own money.

Which leads to the second question: “Might your parents want to help their grandchildren at all, for example with school fees or getting on the property ladder?”

Often clients won’t be sure. They and their parents may not have had that conversation. But they’ll realise it’s a possibility. After all, grandparents are famously doting. So almost always they’ll say that yes, they may well want to help.

This creates a natural reason to speak to the client’s parents.

The same goes when discussing possible inheritance. Rather than ask clients if they themselves expect to receive an inheritance, which could make them feel greedy, consider a slight shift of focus:

“Might your parents want to leave something to their grandchildren?”

“I imagine so.”

“Then it’s really important I speak to them to make sure that happens as efficiently as possible.”

Again, a natural opener.

This indirect approach is just as effective when looking down the generations to engage with beneficiaries, who may themselves become clients when they inherit.

To help you do this, Octopus has created a document called ‘What I Own and Where I Keep It’. You fill it in with a client, so that when they pass away their executors can easily locate their will, their assets and anything else they’ll need. Your Octopus Business Development Manager can provide you with a copy of this document.

It’s a natural opener for suggesting you speak to beneficiaries, as they’ll often be the ones who’ll be using this document.

Share this article

Related articles

How do VCTs prove their worth?

How do VCTs prove their worth?

Over several decades VCTs have proven their value to shareholders as long-term investments and ever-increasing numbers of entrepreneurs are seeking to build the ambitious, innovative companies that drive these returns. Investors can tap into exciting portfolios that...

Sign up to the GBI Newsletter

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, that fits perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode

x