In my last News & Views of 2023, I made reference to some of the projects we have been working on, one of which was our new “Who are we and what do we do” document.
On many occasions, we have found that although we enjoy solid, long-term relationships with clients, what we actually do as a business and the disciplines we meet behind the scenes often remain one of the best kept secrets of all time!
You will find attached to this email a copy of the Introductory Document and whilst this will be used with new clients, we felt that we should share it with you as well, not only to “take a look under the bonnet” at what we do but also to introduce our new look. We have taken the opportunity to redesign our Terms of Business, (in look & layout only - the content remains the same) and when we next update these with you, you will see the style of presentation is in the same theme and we hope is a little more user friendly.
I have talked previously about the new Consumer Duty regulatory standards which were introduced by the FCA in the UK in July last year, which have a number of requirements, one of which is clarity of information. This has resulted in a far-reaching overhaul of our procedures and the attached is a small part of that review.
Although Consumer Duty is an on-going standard we will be adhering to, having now completed our inhouse updating, we find we have capacity to look after additional clients and have plans to expand our client base.
Have no fear, this is not thinly disguised empire building, but rather a wish to increase the critical mass of the business, such that it can strengthen our ability to respond to change but most importantly, to continue to provide friendly, professional, compliant, and cost-effective services, all of which are our core aims.
“We have capacity and would welcome personal referrals.”
The majority of our clients come to us by way of personal referral, which is a very strong starting point, and we would therefore be very pleased to receive any referrals that you might think appropriate. Rest assured, our follow up will be totally confidential and without cost or commitment for an initial chat or meeting to determine if we are able to assist.
For the majority of our Private Clients, whether located in the UK or overseas, they typically have accumulated capital in a variety of investment areas, including pension funds, with key concerns to preserve wealth, grow value, generate income, minimise tax and for many, to pass on as much as possible to the next generation.
Other aspects of regulatory influence that we are seeing, is putting pressure on the investment industry to reduce costs and ironically to my mind, the focus is on cost rather than value for money, which I think is missing a key point. The results we are seeing are twofold: firstly, we may well be witnessing a “race to the bottom” in respect of charges and whilst instinct might say this is a good thing, I do not believe that is necessarily the case. Cheap is not necessarily cheerful!!
The second impact is consolidation in the industry, examples of which are the merger of Rathbones and Investec and the acquisition of the discretionary management business of ABRDN by LGT Wealth, both of which being announced last year. We have seen this type of consolidation across the pension and insurance industry over many years and whilst the main driver is often cost saving, as we know too well, it can lead to lower service standards and less choice. Curious when you consider one of the regulators stated objectives is to increase competitiveness at the same time as forcing the pace on cost reduction, which results in consolidation!
Fortunately, consolidation is not the only way to address cost management; new technology is and will continue to drive a lot of changes and hopefully improvements going forwards but that of course will take investment, not only in cash terms but time allocation as well.
“Flexibility to make recommendations where we feel change would be beneficial.”
One of the advantages we enjoy as an independent firm, is that we can and do keep a close eye on these changes and have the flexibility to make recommendations where we feel change would be beneficial. We would not advocate change for change’s sake but will take advantage of better outcomes for our clients.
New UK Tax Year Looming!
Although we have just started a new calendar year, our thoughts are already turning to tax year end considerations and any pre and post tax year-end financial planning opportunities.
Pension contributions remain a favourite topic, for those with earned income, in view of the tax savings that can be made and in some circumstances, the ability to lower tax bands and/or extend the basic rate tax band can be achieved.
With the abolition of the Lifetime Allowance, (LTA) for pension funds, this has largely removed a fear of overfunding. Also, with total flexibility in accessing benefits over the age of 55, an exemption from Inheritance Tax (IHT) and the ability for pension funds to “cascade” down the generations; rather than being a “stuffy old pension,” they are in fact an exceptional IHT and succession planning tool which can be used to great effect.
With the ability to contribute up to £60,000 per year and to carry forward unused allowances from the previous 3 years, the scope for planning is huge.
As a reminder, pension contributions will attract tax relief in the tax year they are paid which is why considering your tax position now could identify that a pension contribution before April is appropriate to make.
“Most allowances work on a use it or lose it basis.”
The pension allowance is rare as it can be carried forward – most allowances work on a “use it or lose it” basis and this applies to things like ISA contributions as well as personal and Capital Gains Tax allowances, including some IHT allowances.
We also saw a major change this tax year with Capital Gains Tax, (CGT) as the personal allowance reduced by over 50% to £6,000 each person – worse still, this is due to halve again in April. If you might have capital gains and unused allowances, consider using them before April.
Although it is not a tax-year sensitive issue, if you are reviewing your finances, it is probably a good idea just to ask the question whether your Will is up to date and should you be considering setting up Powers of Attorney.
If any of these areas are of interest or concern to you, please get in touch with your usual contact at ABC or email firstname.lastname@example.org and we will follow up from there.
For Our Overseas Clients.
My apologies, most of the above points are not directly relevant to you as your tax year is very likely to be the calendar year. The same allowances and reliefs as described will not typically apply to you (although the UK IHT rules may have some impact) but the questions you ask could be similar and worth exploring. Certainly, the point about Wills is important for everyone and if you have assets in more than one jurisdiction and/or remain UK domiciled, there are some areas to be explored.
“We recommend regular reviews.”
We recommend regular reviews, normally on an annual basis, but interim if circumstance change. In this way, we are able to bring you up to date with any changes which may affect you but as importantly, it enables you to tell us about your changes in circumstances or plans, that might impact your investments and future financial planning.
A Quick Look At The Markets
Just over 4 years ago, I remember feeling at the end of 2019 that the markets had ended the year in a fairly strong position and we were expecting to see a positive year going forwards. Then came February; Covid landed and since that time, we have been on a rollercoaster, lurching from one concern to the next.
As we have often said, markets are driven by sentiment and trying to anticipate where things are heading, typically looking 6 to 9 months into the future.
The big question therefore, is whether we have reached a turning point and if the last quarter of 2023 was just a blip or indeed is this the start of what should be a sustainable rally?
The only sure way to answer that question will be to wait-and-see but many indicators are looking positive and the general mood with the Fund Managers that we work with is far more optimistic than it has been for some time.
Central Banks are notoriously tight-lipped, but over the weekend there were some comments in the press speculating that interest rate reductions in the UK could start as early as May this year. We have always thought that rates would reduce more quickly in the US and as these expectations grow, we may well see optimism reaching the markets which will drive values forwards.
“Time in the market rather than trying to time the market.”
With High Street interest rates for savers climbing over the last year to around 5%, this is great news for short term savings but longer-term investment still needs a broader approach. What is often quoted, is that time in the market rather than trying to time the market is the best strategy and, in many ways, November 2023 proved that! Had you been out of the market that month, you would have missed growth that would take more than a year to recover from cash on deposit.
As always, if we can assist in any way, please do let us know and we will keep in touch.
Best wishes from all at ABC.