Estate planning is one of the fastest growing sectors in the Financial Services world. This is hardly surprising given the increase in individual wealth.
This provides several opportunities for advisers. The right approach can widen their client base through working with different members of the family, and can also build relationships with the recipients of the wealth and so preserve assets to manage over the longer term. In turn this can add to the value of the adviser’s business.
Business Relief is a technically straightforward and flexible option. However, for advisers it can cause problems and uncertainty, especially if it is a sector that they only tackle once in a while. They need to understand the products they are offering and the risks involved. The Hardman & Co Bespoke Business Relief Consultancy Services can give advisers a shortcut on a case-specific basis, saving time and giving better client outcomes that the adviser can be confident in.
Understanding the risks
When Business Relief products are used, an understanding of the investment risk is paramount. In many instances the products may appear as ‘low risk’, yielding perhaps 3%. The reality is that some providers may be targeting a 10% gross return, to deliver 3% to the client. The balance is absorbed in fees and charges. Targeting an investment return of 10% typically entails considerably more risk than 3%.
Another risk to consider is whether the client’s exposure is adequately diversified by provider as well as by product, in the same way as other investment portfolios.
And then there is the issue of private company valuations. These are notoriously difficult, as a degree of subjectivity is often required in establishing fair value. Importantly, are they realistic? Particularly in the fall-out from Covid-19.
Hardman & Co regularly provide consultancy services related to the valuation of private companies, and have extensive experience in this sector.
The risk of getting it wrong
It takes time and specialist knowledge to thoroughly understand and research the market. It is time that most advisers don’t have. Referring to an independent fund review alone may not be enough.
Unless advisers understand the nuances of this market, and how the different BR products are structured, they could run the risk of offering inappropriate or unsuitable advice.
In addition, things change over time. New products are entering the market too. Advisers have to review IHT plans regularly to ensure that they are still meeting the needs of their clients, and ensure that providers have not significantly changed what they do.
The benefits are very clear.
- Expertise is available precisely when you need it.
- It saves advisers many hours of time. No longer do you have to undertake a review and analysis of the whole market, just for one case. We have already done that for you. And by saving you this time, it also helps advisers to be more cost efficient.
- Advisers have the reassurance that the advice they are giving to their clients is based on high quality independent research and analysis.
The outcomes are satisfactory for both the client and advisers.
Richard Angus, Hardman & Co
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