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Industry Update | October 2024
Business relief
Diversifying against foreseeable harm
Ingenious
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Thought Leadership
Puma Investments
122,000 clients could be missing out on best outcomes through Business Relief
Stellar Asset Management
Consumer Duty – The platform paradox
The family trading company route to Business Relief
Octopus Investments
How Business Relief could kick start the conversation with an uncertain client
Praetura Investments
Security, diversification and liquidity through funding UK growth
TIME Investments
A Business Relief case through the consumer duty lens
Deepbridge
Leaving more than just money
Downing
Business Relief Basics Series
Zenzic Capital
Managing risk and return with a core satellite approach
Advising during times of uncertainty
Triple Point
Intergenerational planning: how advisers can help families deal with difficult times
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Introduction
Market Update
Considerations for Investment
Industry Analysis
Managers in Focus
What's on the Horizon
Further Learning
The BR universe today
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learning objectives
The Business Relief (BR) universe today
With all of the speculation about mammoth holes in government finances and what the new Labour government might do about them, inheritance tax has come under the spotlight as a means of topping up the Treasury’s coffers. That’s rumoured to involve tweaks and adjustments to reliefs and other taxes. But IHT is certainly not going away and nothing is currently confirmed, so when it comes to estate planning, inaction comes with a price.
br claims: number of estates claiming vs overall amount claimed
The BR universe Diversifying against foreseeable harm 122,000 clients could be missing out on best outcomes through Business Relief Business Relief basic series Intergenerational planning: how advisers can help families deal with difficult times The family trading company route to Business Relief Consumer duty - the platform paradox Leaving more than just money The interview room Advising during times of uncertainty How Business Relief could kickstart the conversation with an uncertain client Security, diversification and liquidity through funding UK growth A Business relief case through the consumer duty lens Managing risk and return with a core satellite approach About Intelligent Partnership
If clients defer BR planning because of an environment of uncertainty, the BR qualification period is also delayed.
Source: Table 12.2, HMRC annual IHT statistics for 2021/22 published July 2024
HMRC’s most recent annual HMRC statistics detail a rise of Inheritance Tax (IHT) liabilities for the 2021/22 tax year of £0.23 billion (4%) compared to the previous year, resulting in an overall IHT take of £5.99 billion. This is the highest on record. HMRC attributes this to a combination of higher volumes of wealth transfers following recent IHT-liable deaths and recent rises in asset values. And with the great wealth transfer in full swing, the Office for Budget Responsibility (OBR)’s latest Economic and fiscal outlook – published in March 2024 - forecasts IHT continuing to swell without any targeted political intervention, hitting £9.7 billion in 2028/29. Within a context of growth incentivisation, Family Business UK has recently called Business Relief a positive example of how tax reliefs can support business growth. “Since its introduction in 1976, BR has given business owners the confidence to focus their efforts on building their businesses and competing globally, while also providing further incentive for families to grow their businesses.” This relates to a huge 90% of all private firms in the UK which are family businesses. That’s 4.8 million companies employing millions of people and contributing more than £200 billion every year in taxes. That type of tax take has been filling up tax holes for the last fifty years. No wonder Family Business UK’s recommendation is for the government to maintain Business Relief in full. Not only does BR encourage growth in UK businesses, it also drives investment into them and it makes the ‘sooner rather than later’ case that good financial advisers prescribe to, because doing nothing will simply lead to the tax-planning clock running out. If clients defer BR planning because of an environment of uncertainty, the BR qualification period is also delayed. Failure to meet the minimum two-year holding period might ensue, leading to zero tax relief. What’s more, the longer the investment period, the greater opportunity for returns on the investment to grow and compound. It’s undeniable that inheritance tax planning is a complex area; despite the headline marginal rate of IHT being 40%, the available allowances and exemptions meant the average effective tax rate (AETR) for 2021/22 was 13%, for all 27,800 taxpaying estates; around one-third of the headline rate. It’s also true that the general trend over the last ten years been an increase in the value of BR claimed, something not particularly unexpected when asset values have also been generally on the up, although in 2021/22, the value of BR claimed fell by £0.4 billion (11%). Given the opportunity that BR offers to invest in UK businesses that support the UK economy and limit exposure to uncertain markets overseas, perhaps the question on the lips of those looking to expand the UK economy should be how to enhance BR?
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- Van Hoang, Investment manager, Blackfinch Investments
The clearer market environment post-Brexit, as well as a tighter grip on the pandemic, creates an outlook conducive to increased listings on AIM.
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role, Intelligent Partnership
Smaller stakes have little choice
Unfortunately, individual retail investors are unlikely to hold a large enough stake to change the outcome of these votes. But, on the other hand, in the vast majority of takeovers seen in the first half of 2021, there was a substantial bid premium where the share price increased during the offer period. The highest was an eye-watering 79%, although more commonly, it was in the lower, but still very pleasing 20% - 50% range.
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rguably the most obvious foreseeable harm in Business Relief investments is the risk of the investor not fulfilling the two-year ownership requirement. If they die before holding the Business Relief qualifying shares for a minimum of two years, so do their hopes of claiming 100% IHT relief on the value of those shares. A handful of specialist Business Relief investment managers blend life insurance with their offers. This covers the costs of the IHT liability if the policyholder dies within the first two years, to mitigate the impact of this possibility. One such manager is Ingenious, whose Ingenious Estate Planning Apex (IEP Apex) service does things a little differently to some of the other options by providing investors with cover under a group life insurance policy that is designed to mitigate against IHT as soon as Business Relief qualifying shares are allotted. The cost of insurance is paid for by Ingenious with no additional charge to the investor. The cover pays for IHT liabilities on the initial value of the subscription. Once Business Relief qualification is achieved in the third year of ownership, the insurance element falls away. Business Relief qualifying investments are typically, although not exclusively, selected by clients in their 70s and 80s. As they get older, the risk of IHT planning failure increases, leading to poor estate planning outcomes. The UK’s population is ageing, with the fastest growing segment being those in the typical BR buying cohort. But, think about this: based on data from the Office for National Statistics, one in seven people aged 70-90 are likely to die within two years*. The simplicity of the IEP Apex cover is ideal for customer understanding and it can fit into a diversification risk mitigation strategy, which is a very important consideration for advisers. As there are limited routes to insurance covering failure to reach the minimum holding period for Business Relief qualification, advisers with cases of any scale, particularly those involving relatively aged clients, might reasonably be expected to have seriously considered IEP Apex as one of the offers into which at least a portion of the funds should be deployed.
By Simon Harryman, Managing Director (Distribution), Ingenious
The simplicity of the IEP Apex cover is ideal for customer understanding and it can fit into a diversification risk mitigation strategy, which is a very important consideration for advisers.
This is because diversification across investment managers, particularly to divide larger investment amounts, is an increasingly key mitigator of two other foreseeable harms – counterparty risk and concentration of underlying trades. IEP Apex focuses its activities on high quality lending in the real estate sector with lending secured against bricks and mortar. Given the five Defaqto Diamond Rating and Defaqto Five Star rating achieved by IEP Apex, an independent classification denoting an excellent product with a comprehensive range of features and benefits, providing one of the highest quality offerings on the market, there are very good reasons for IEP Apex to be in the mix.
theingeniousgroup.co.uk investments@theingeniousgroup.co.uk
Managing Director (Distribution), Ingenious
simon harryman
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HT receipts are on the rise. Earlier this year the Office for Budget Responsibility forecast their increase to just under £10 billion annually by 2028/29. And that’s without any changes in the upcoming budget. Recent statistics released by the Equity Release Council (ERC) show how swelling asset values are acting to draw more people into the IHT net. With property typically the most valuable asset held by individuals, the figures estimate the overall property market stock value at £7.3tn, up from the previous high of £5.6tn in mid-2022 when post pandemic demand peaked. In London and the South East in particular the average net property wealth per over-55 homeowner household leaves little headroom for any other assets before an IHT liability is potentially applicable – at £583,618 and £426,749 respectively. Yet, our own research has revealed that advisers estimate that 18% of their client base would benefit from holding a Business Relief solution but DON’T currently have one. While this might not initially sound significant, it startlingly equates to over 122,000 advised clients aged 55 and over. That relates to the 8% of UK adults over 55 who received financial advice in 2023, according to the FCA. Limiting those to clients with over £100k, investable assets gives us 240,380 and if we filter using the 51% of advised clients our research revealed who haven’t discussed Business Relief solutions with their adviser BUT WOULD be interested in finding out more about them, we end up with 122,594. That’s the equivalent of more than 20 clients per financial advisory firm authorised to give retail investment advice or around four for every single adviser in the UK with that regulatory permission. After surveying advisers we found that there is a confidence gap where the use of Business Relief is concerned; 82% of advisers identified with having some degree of caution and hesitancy when having Business Relief conversations with clients. But the reality is that the Consumer Duty demands the implementation of the best options, not just those that appear familiar or straightforward.
By Puma Investments
To find out more about the Puma Heritage Estate Planning Service click here. Alternatively, visit our website pumainvestments.co.uk or drop us an email:
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For those who are experienced in this space, it’s key for advisers to take into account how Business Relief can be used with other IHT solutions to improve outcomes. Given the varying underlying trades of Business Relief investment managers, according to Sophie Haslehurst, Chartered Financial Planner at Integrity 365 with seventeen years of experience and expertise within the tax-efficient investment market, “you have to understand what the underlying strategy is of the product and not just focus on the provider.” She goes on, “you have to be able to explain it very clearly and simply. And we shouldn’t be afraid to talk about the risk because there will always be a risk with any form of planning – it’s about understanding and articulating that to our clients so they feel comfortable with taking that risk.” Including Business Relief in the discussion can also give clients a fuller understanding of the entire planning landscape, preparing them for what might be possible as well as its pros and cons, Sophie went on to say: “Ultimately, if you give money away, you can’t access it but if it’s still yours you can and that’s one of the reasons I do talk about Business Relief to clients even if it’s not the right solution for them at that point.” This is particularly pertinent in the context of our other findings that underline the growing importance of tax efficiency to clients, with more saying they ‘worry about tax equally’ (25%) than don’t. For more information on how to provide the tax efficiency more and more clients are seeking and to ensure your clients’ Business Relief needs are met, take a look at our highly-rated CPD webinar: Closing the gaps featuring Tony Wickenden In this 45-minute webinar we explore the imminent Great Wealth Transfer and the five critical gaps that could hinder the seamless transfer of £5.5 trillion in assets to the next generation. What can providers and advisers do now to close these gaps and ensure the best client (and business) outcomes more of the time?
businessdevelopment@pumainvestments.co.uk
Investor’s capital may be at risk. Past performance is no guarantee of future returns. Tax benefits are subject to change and depend on the individual’s circumstances. Puma Investments is a trading name of Puma Investment Management Limited (FCA no. 590919) which is authorised and regulated by the Financial Conduct Authority. Registered office address: Cassini House, 57 St James's Street, London, SW1A 1LD. Registered as a private limited company in England and Wales No. 08210180.
For investment professionals only.
https://todayswillsandprobate.co.uk/home-equity-hits-record-5-7tn/ Inheritance tax planning, adviser and consumer research, Ad Lucem, June 2024 NextWealth estimate that 90% of financial adviser’s clients have over £100,000 in investable assets The number of firms authorised to provide retail investment advice was 5,805 as at February 2024 (https://www.ftadviser.com/your-industry/2024/02/21/britain-has-lost-435-financial-advice-firms-since-2022/) The number of individuals in the UK authorised to provide retail investments advice February 2024: 31,182. (https://www.ftadviser.com/your-industry/2024/03/12/worry-for-profession-as-young-adviser-numbers-plummet/)
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What is the Nil Rate Band (NRB)?
ith IHT receipts amounting to approximately £7.5 billion in 2023/24, compared with £7.09 billion in the previous financial year, it’s important to speak with your clients about their potential IHT liability and which estate planning solutions could be appropriate for them. Understanding the common Inheritance Tax reliefs and exemptions when looking at your client’s potential IHT liability is a great first step. Downing has developed the ‘BR basics series’; a collection of digestible guides aimed at supporting your understanding of these exemptions and how they may interact with Business Relief. The first two exemptions covered in this series are the Nil Rate Band and the Residence Nil Rate Band.
By Downing
The Nil Rate Band and Discretionary Trusts
The Nil Rate Band (NRB), also known as the IHT threshold, is the amount up to which an estate has no IHT to pay. Each individual’s estate can benefit from the NRB. The £325,000 NRB has been frozen since 2009 and is fixed until April 2028 at the earliest. With asset value inflation, this means more people have been falling into the IHT net and will continue to do so. This is known as fiscal drag.
What is Business Relief?
Business Relief (BR) is an established relief from Inheritance Tax. By purchasing shares in a company that qualifies for Business Relief, your client could potentially reduce their Inheritance Tax liability. Shares in Business Relief qualifying companies, if held for a minimum of two years, and at time of death, should be eligible for 100% Inheritance Tax relief. *
Transferring assets into a Trust is useful as it removes those assets from the estate, but a 20% lifetime IHT charge is immediately payable if the transfer value and all previous Chargeable Lifetime Transfers in the last seven years, when added together, exceeds the Nil Rate Band. Crucially, no IHT is payable when BR qualifying shares are transferred into a Discretionary Trust, so there is no need to limit the amount transferred to less than the available Nil Rate Band to avoid a 20% lifetime IHT charge. However, the trustees must retain ownership of the BR qualifying shares (or any replacement business property) for two years or until the death of the settlor, if earlier. In addition, the transfer of the assets into trust doesn’t use any of the deceased's Nil Rate Band, meaning it remains available to use against other assets in the estate.
CASE STUDY
Two years ago, Sam, 75, transferred £300,000 of assets into a Discretionary Trust.
He has just received a windfall and wants to transfer another £350,000 into the Trust.
But this means that he would be liable to an immediate 20% Lifetime IHT charge for the value of the second transfer above the available Nil Rate Band (£325,000 x 20% = £65,000).
Instead, he is advised to invest the £350,000 into BR qualifying shares and to hold them for two years.
Once the minimum holding period is achieved, he can transfer them to the discretionary trust without the IHT liability
Each individual has their own NRB. For married couples and members of a civil partnership, it is possible for any unused proportion of the NRB of the first spouse or civil partner to be transferred to their survivor. This means that any part of the NRB that is not used when the first spouse or civil partner dies can be transferred to the surviving spouse or civil partner for use on their later death.
Transferring the Nil Rate Bands
Nil Rate Band (NRB)
The RNRB exempts the first £175,000 per person of a main residence value from IHT, if in a marriage or civil partnership, this equates to £350,000 per couple. Adding the RNRB to a couple’s Nil Rate Band, this equals £1 million of exempted Nil Rate Bands per couple. If the couple’s estate is worth less than £1 million and their full NRB and RNRB is available, there is no liability to IHT. In order for RNRB to be claimable, the residential property must be left to direct descendants. The RNRB will be reduced by a rate of £1 for every £2 the value of the estate exceeds £2 million. Where the value of an estate exceeds £2 million pounds, the RNRB will be tapered away at a rate of £1 for every £2, reducing the available allowance to nil at £2.7 million. Unused RNRB can be passed from one partner to the other provided they are married or in a civil partnership. It’s the unused percentage of the RNRB that’s transferred, not the unused amount. When someone has sold, given away or downsized to a less valuable home before they die, their estate may be able to get an extra IHT threshold. This is known as a downsizing addition.
What is the Residence Nil Rate Band (RNRB)?
residence Nil Rate Band (RNRB)
If they are held at the date of death, BR qualifying investments remain part of the estate value calculation for the purposes of the RNRB.
BR qualifying investments and the RNRB
When a gift is made during the transferor’s lifetime that is not covered by normal gifting exemptions, it is known as a Potentially Exempt Transfer (PET). If during the seven years post the gits, the transferer dies, it will become a failed PET. The value of the net estate does not include the value of any failed PET for RNRB purposes.
Gifts and RNRB
Take a look at how the RNRB and Business Relief interact with Jenny’s estate planning:
Jenny has an estate valued at £2.5 million including a house with a value of £950,000. Jenny wants to make her estate more tax efficient so that her two sons, and her sister Sally, will receive more of its value on her death.
To reclaim the full RNRB, she invests in £500,000 of BR qualifying shares and after holding them for the two-year minimum period, gifts them to her sister, taking her estate value down to £2 million.
Jenny dies only two and a half years later, as a result, the gift becomes a failed PET. However, the value of the failed PET is not added back into Jenny's estate
On death, Jenny passes her main residence to her two sons. Jenny's estate benefits from the entire RNRB of £175,000.
As the BR qualifying shares are retained by Sally until the date of Jenny’s death, they remain BR qualifying, there is no additional IHT due on Jenny’s estate.
Take a look at how the NRB and Business Relief interact with Sam’s estate planning:
To explore the rest of the series and access additional resources for advisers, click here Please also visit our website Downing.co.uk or drop us an email:
Sales@downing.co.uk
This article is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. No reliance should be made on this content to inform any investment of tax planning decisions. This content contains information that is believed to be accurate at the time of publication but is subject to change without notice. The explanation of all of the tax rules set out have been written in accordance with our understanding of the law and interpretation of it at the time of publication. Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
Important notice: This article is for investment professionals only.
Downing is a trading name of Downing LLP. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference No. 545025). Registered in England and Wales (No. OC341575). Registered Office: 3rd Floor, 10 Lower Thames Street, London, EC3R 6EN
*Business Relief is not guaranteed. It is dependent on the business continuing a qualifying trade. Businesses could also lose their Business Relief qualifying status if the Business Relief rules change, which could result in an IHT liability on your client's investment.
e’ve discussed previously how financial planners can help their clients find a way forward through positive life events. But what happens when a client’s life takes an unexpected negative turn? Of course, these are the times when good financial planning takes on even greater importance, not only on behalf of the client, but for their family too. In this article, we discuss more challenging scenarios where intergenerational wealth planning could make all the difference.
Another advantage of the Triple Point Estate Planning Service is that it can continue to be passed down from one generation to the next, retaining its IHT mitigation benefits despite ownership being transferred.
Securing wealth from one generation to the next
Another advantage of the Triple Point Estate Planning Service is that it can continue to be passed down from one generation to the next, retaining its IHT mitigation benefits despite ownership being transferred. It’s a great example of how Business Relief can play an effective part in intergenerational wealth planning, staying ‘in the family’ for generations, thereby staying true to the original intention of Business Relief legislation. It’s also an excellent way for advisers to build meaningful relationships with generations of clients, while demonstrating the value of long-term financial planning.
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By Triple Point
Helping clients deal with elderly or infirm parents
One situation many financial planners will recognise is when a client needs their help with putting their parent’s financial affairs in order. These types of conversations can often happen after the parent has experienced a recent health scare or received a critical medical diagnosis. Even in cases where the parent already has estate planning strategies in place, such as settling assets into trust or making potentially exempt transfers (PETs), the client may be concerned the parent may not live the full seven-year period for those strategies to achieve full IHT exemption. In the case of a failed PET, the person who received the gift would be required to pay any IHT bill due. However, if the parent made an investment into the Triple Point Estate Planning Service, their shares would be expected to qualify for Business Relief – and therefore be exempt from IHT – after two years, provided they still held the shares at the time of their death. Reducing the time needed for IHT exemption from seven years to just two could make a huge difference when the parent’s estate – and IHT liability – is calculated.
Of course, when a client’s parent passes away, this means the client has a number of emotive and difficult issues to deal with all at once. And in financial terms, they now may also have an inheritance to consider as well as questions over how that inheritance affects their own estate planning. It can easily be overwhelming. At times like these, it’s important that investment providers recognise the difficulties people are facing and respond in the most helpful and understanding manner. For example, if the client’s parent had invested into the Triple Point Estate Planning Service, the client would need to decide what to do with that Business Relief-qualifying portfolio. That’s why we created a dedicated Estates and Probate Team which is available to talk through any questions that either the beneficiaries and the executors of an estate have about the Triple Point Estate Planning Service, or the different options available to them after the Grant of Probate has been issued. These options are:
When the parent dies
Once probate has been granted, they can ask for the investment to be transferred to the nominated beneficiaries and continue to be held in their name. Provided those shares had been held for a minimum of two years at the time of the deceased parent’s death, the shares inherited by the beneficiaries should immediately qualify for Business Relief without restarting the two-year holding period. Once probate has been granted, they could ask us to sell the investment on behalf of the beneficiaries and ensure that all proceeds are paid directly to them. They could ask us to use the investment to pay an outstanding IHT bill due on the deceased’s estate. This is particularly important as probate cannot be granted until any outstanding Inheritance Tax bill has been settled. In cases where the estate has an outstanding IHT bill the executors can instruct us to sell the investment before probate has been granted and we can facilitate payments directly to HMRC, regardless of whether the investment had been held for two years.
In cases where the estate has multiple beneficiaries, the executors can instruct us to carry out a combination of these options, transferring a portion of the investment to some beneficiaries while paying out a share of the proceeds to others.
At Triple Point, we say that “significant events need significant planning” because it helps to highlight the advice opportunities for advisers. To find out more about how tax-efficient investing can help with all manner of life events, including intergenerational wealth planning, visit our website at: tpeps.triplepoint.co.uk.
Advising on life events with Triple Point
Important information
The Triple Point Estate Planning Service places capital at risk. As with any investment, there is no guarantee that the target return will be achieved and investors may get back less than the amount they invested. Past performance and forecasts are not a reliable indicator of future performance. Tax treatment depends on the individual circumstances of each client and is subject to change. Tax relief depends on the companies we invest in maintaining their qualifying status
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e live in uncertain times… but death and taxes remain certain! To that end, parents rightly want to protect their hard-earned wealth and pass onto their loved ones in an optimal way. But there are two dangers lurking in the undergrowth here – one obvious, the other not so. In 2023, Demos (a leading think tank) published research which outlined how over £100 billion is passed across generations each year in the UK in inheritance and gifts... a number that's growing exponentially. Yet a sobering statistic is that the retention of family wealth appears to be decreasing alarmingly, with about 70% of wealthy families losing their wealth by the second generation, and 90% by the third. There could of course be a number or reasons for this - an obvious one being Tax, both on transfer and after receipt, but the other is not so obvious - choices (possibly poor) made by the recipient/beneficiary. At Stellar we believe we have the solution: Asset backed BR arrangements have to date successfully helped families mitigate IHT. But the typical “TopCo” approach that pools investors’ money, issues shares in TopCo and collectively invests in underlying qualifying business activities for the purposes of IHT mitigation using BR rules often fails to facilitate an ongoing intergenerational approach. It doesn’t encourage engagement with the beneficiaries, those who are set to inherit or articulate an integrated family plan to cascade the legacy down the generations and generate a sense of ownership and protection of it. Neither does it bring the financial adviser into close and ongoing contact with a cross section of family members. This is something that’s dynamically beneficial to the client, the beneficiary (and their beneficiaries) and the adviser who remains engaged with the asset and becomes involved with the financial planning arrangements of the next generation and beyond. It’s a win, win, win! While we too have a TopCo arrangement (as a tax boutique you’d expect it) our core offering is quite different to the mainstream structure, making us unique in the space. It’s not a TopCo strategy, it’s an individually owned Private Trading Company approach. For 20 years we’ve successfully been establishing highly personalised Family Trading Companies (FTCs) for individual families giving them far greater involvement and control over their Business Relief qualifying investments and giving shareholders across the family the opportunity to have an influence and build a sense of responsibility for the assets.
By John Fearon, Head of Third-Party Relations, Stellar Asset Management
*subject to individual circumstances and not guaranteed
In 2023, Demos (a leading think tank) published research which outlined how over £100 billion is passed across generations each year in the UK in inheritance and gifts... a number that's growing exponentially
John Fearon, Head of Third-Party Relations, Stellar
The scheme is particularly suited to Sophisticated and HNW Investors, although it may be a good option for many families looking for an effective way of investing in real grass root businesses/developments/projects that make a positive impact, create employment and opportunity and generate tax revenue whilst delivering wealth generation and IHT mitigation for the family. We’ve provided families with hundreds of real exits with real and attractive IRRs, generating long term equity-like returns without the volatility thanks to expert deal acquisition, business management and specialist JV partners. This personalised arrangement is not a collective one and could be considered a Family Investment Company ‘light’… but unlike a FIC costs a lot less, is less complicated and mitigates IHT. It provides a defined, packaged, robust legacy that will cascade down the generations; one that’s hugely flexible with regards to tax and income generation; an FTC can also be structured so as to enable “top-ups” from future asset sales that should qualify immediately for Business Relief*. It has no upper limit on investment or company size, the family can select the assets it invests in if it chooses and it facilitates the engagement of the beneficiaries and the next generation, resulting in real intergenerational legacy planning that requires the ongoing involvement of the family adviser across the generations. If the great wealth transfer – some $83 trillion in the next 20 years with most of this in the next 10 years - is going to be effective, robust, personalised arrangements that foster the need for intergenerational communication and involvement and expose beneficiaries to the realities of wealth generation and preservation could be key – the affordable win, win, win solution is here for clients and advisers alike.
stellar-am.com enquiries@stellar-am.com
Head of Third-Party Relations, Stellar Asset Management
john fearon
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Consumer Duty - The Platform Paradox
he Consumer Duty came into force on 31 July 2023 to drive better outcomes for customers. This has had far-reaching impacts across all areas of financial services; product providers have been obligated to review their services to ensure they deliver good outcomes for clients, IFAs now need to demonstrate that their client review processes represent value for money and are helping clients to achieve their objectives, while investment platforms have also had to confirm that their custody solutions provide fair value when compared to the rest of the market. As a product provider, we are able to demonstrate that the Stellar AIM IHT Service continues to provide good value to clients on a price basis. When reviewing the service’s actual NAV performance figures, as produced by ARC, the Stellar AIM service is 1st quartile, relative to peers, over 1-, 3-, and 5-years, demonstrating both good value and optimised client outcome on a total return basis. The point here is that it’s not all about cost – the Consumer Duty’s fair value assessment requires a focus on ensuring the price the customer pays for a product or service is reasonable compared to the overall benefits (the nature, quality and benefits the customer will experience). Our internal quarterly analysis assesses the actual outcomes that clients experience across a range of data points and ensures that we’re delivering to customers the outcomes we strive for. But, while price value assessments provide investors with a useful tool to review similar products and services, we believe some factors that can influence outcomes for retail customers continue to fly under the radar.
By Phil Kirwan, Portfolio Manager, Stellar Asset Management
Consumer Duty and its associated obligations are, hopefully, the first step to much needed root and branch review of the platform space, and the significant role they now play in so many clients' financial services experiences.
The financial cost of holding assets on platforms is easy enough to calculate, but what consequences do the platform’s functionality, customer service, or trading procedures have on the customer experience, IFAs and DFMs (Discretionary Fund Manager) and ultimately end user client outcome? The impact will vary greatly depending on the service and the platform it’s offered on and the good news is that more advisers than ever are asking these sorts of questions. Adviser confidence in platforms appears to be at an all-time low; in their research paper published in 2023, Lang Cat found that 88% of advisers have had to apologise to their clients for issues with their platforms in the past year. When canvassed on changing platforms, over a third of advisers cited poor customer service as the primary factor when moving their clients to a new provider. It is, therefore, unsurprising that platform providers are not keen to publish more detailed analysis on the impact of their own services on customer outcomes. The small-cap trading service provided by investment platforms is a good example. At Stellar, we have long been aware of how important it is to pay attention to these issues and ensure that our investment products are managed as efficiently as possible across the varying platform service levels and processes. As a small-cap equity manager, trade execution plays a key role in ensuring good client outcomes and is something we are actively involved in. There are several platforms for whom direct equity trading is an afterthought bolt-on to their primarily fund-based offerings. The outcome of this can be meaningful, with poor execution demonstrably and negatively affecting Net Asset Values. We firmly believe that the impact of platforms’ trading functionality is not given enough consideration by either the platforms themselves or the FCA. Platform Best Execution Reports, which include hundreds of thousands of trades in single-priced assets, mask the failures to ensure good outcomes in smaller, less liquid trades which, admittedly, make up a far smaller number of the platform’s overall trades. But, for the clients being impacted regularly by these trading failures, it is scant reassurance that the vast majority of the platform’s other clients are not. This lack of clarity is obscuring the subsequent changes to outcomes, both at Discretionary Fund Manager (DFM) and performance level, particularly when dealing is not done at optimal prices. At DFM level, these factors often necessitate time-consuming “work around” solutions requiring additional resource and expense that eventually has to be passed to the client. Consumer Duty and its associated obligations are, hopefully, the first step to much needed root and branch review of the platform space, and the significant role they now play in so many clients’ financial services experiences. Together, DFMs and IFAs must continue to educate the platforms on the issues they face and push for better outcomes. If they are not forthcoming, then it is the duty of both the DFM and IFA to move their clients or services to greener pastures.
Portfolio Manager Stellar Asset Management
phil kirwan
usiness Relief offers some valuable advantages that really bolster later life and estate planning. Accessibility and control of capital that has the opportunity to grow and become 100% free of inheritance tax (once held for two years and on death) is a compelling tool to help clients achieve their financial goals. For many of them, putting more money into the hands of their beneficiaries is a key objective. But Business Relief also has the potential to give their legacy positive impact across many future generations, creating an improved environmental or societal context their heirs and descendants will be proud of. That future is starting now, with BR-qualifying companies tackling the real issues of generating enough capacity to sustainably and reliably power the national grid without the greenhouse gases of fossil fuels. We know that investing in renewables is critical to achieve the Net Zero ambitions that will protect the planet from the most damaging effects of global warming, and our research suggests that 89% of IFA clients share that interest.
Deepbridge also offers Deepbridge Protect as a corporate business relief solution for business owners with excess cash that is potentially eroding or erasing the business relief qualification of their business. This is potentially an inheritance tax trap that many business owners are sleepwalking towards, with Deepbridge Protect representing a significant opportunity for financial advisers to provide additional support to clients who are business owners or company directors. Deepbridge Protect provides short-term lending to social housing developers, to bridge the initial development and planning costs. These quick-turnaround loans, are designed to help increase the availability of social housing in the UK and critically contribute to the solution of the well-publicised housing issues society faces.
deepbridge protect
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By Deepbridge Capital
Diversification across energy sources is important though, so the Deepbridge Estate Planning Service deploys investor funds across wind turbines, anaerobic digestion plants and hydro power installations. The wind turbines are located on small farms where they help support less affluent areas of the local economy, and in particular the farming community, whilst covering the cost of much needed grid upgrades. Meanwhile, the anaerobic digestion sites are to be found on large farms, that benefit from a never-ending supply of farm waste, which through biological processes creates electricity and biogas. The Deepbridge sites for these renewable energy generation operations are located in Northern Ireland and subject to Renewable Obligation Certificate (ROC) subsidies from the UK government. This is particularly opportune since UK power suppliers are obliged to supply a minimum percentage of their total power sales from renewable resources which are certified with ROCs. As well as benefiting from more lucrative subsidies than mainland UK, Northern Ireland is subject to windier weather, allowing for more predictable wind energy generation, and is largely a farming economy thereby producing unlimited anaerobic digestion feedstock. When it comes to hydropower, the speed of water rushing downhill through narrowing pipes that build the pressure driving rotating turbine cups harnesses nature without harmful environmental consequences. Deepbridge’s hydropower projects to date have been predominantly based in Scotland, where big hills and rainfall are prevalent. Whilst this might sound a somewhat satirical comment, it is a critical consideration when assessing investment opportunities.
Deepbridge Estate Planning Service
co.uk email@...co.uk
Job title Deepbridge Capital
name surname
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It is the environmental and societal considerations that more and more clients want to be combining with sound financial planning and that is now entirely possible within estate planning services. While past performance is not a reliable indicator of future performance, in the past five years since the initial construction of its renewable energy assets, the Deepbridge Estate Planning Service has an impressive track record of steady growth over the past five years, so there is evidence of the power of financial and legacy goals thriving cohesively in the right environment.
hydropower
In fact, since the fragility of UK energy security was emphasised with the war in Ukraine and the resulting jumps in the cost of energy, the political and commercial drivers for renewable energy sources have compounded the altruistic ones. And when you consider the predictable, simple and secure income streams driven not just by government subsidies, but also by long-term, measurable consumer demand for electricity and by the consistency of natural power sources like wind, the investment case is hard to deny.
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The interview room
The Interview Room:
exploring the tax-advantaged landscape with industry providers
In this insightful video, we sit down with Simon Harryman of Ingenious to talk about their IEP Apex product, a simple and cost-effective estate planning solution that grants access to Ingenious' asset-backed lending strategy. We cover a lot of ground from the consumer duty, and how Apex aligns itself with delivering the best outcomes for clients, through to how their product is igniting more intergenerational estate planning conversations among clients and their beneficiaries.
Simon Harryman, Ingenious
We sat down with Stephen English to take a closer look under the bonnet of the Stellar Asset Management AIM strategy, diving into some of their key USPs and explore what the outlook for UK small-caps holds.
Stephen English, Stellar Asset Management
We recently caught up with Joseph Cornwall, Investment Manager for Puma’s AIM IHT Service. In this insightful interview, we dived head first into all things strategy, their investment bias and what lenses they need to look through when it comes to picking the winners in the small-cap market.
Joseph Cornwall, Puma Investments
In this interview, Thomas Lloyd-Jones, CIO at Zenzic Capital, reflects on the team's progress, noting the past year's challenges due to rising interest rates and cautious deployment in 2023. However, by late 2023, Zenzic ramped up activity with nine deals, capitalising on improved market confidence. We also dive into Zenzic's specialist real-estate credit investment strategy and why they focus on high-demand sectors like residential, purpose-built student accommodation (PBSA), and self-storage. In addition, we explore how the strategy allows them to prioritise strong borrower relationships, thorough value underwriting, and avoid sectors that have seen inflated valuations.
Thomas Lloyd-Jones, Zenzic Capital
We recently sat down with Nick Priest of Downing and Anthony Villis of First Wealth for a really interesting and in depth conversation around Business Relief (BR). We cover key topics including how BR has evolved over the last 50 years, the common misconceptions, and the importance of contextualising risk when it comes to tax-advantaged products and talking to clients.
Nick Priest, Downing and Anthony Villis, First Wealth
Intelligent Partnership's Guy Tolhurst catches up with Henny Dovland, Business Development Director at TIME Investments. They explore what the IHT landscape looks like and how Business Relief (BR) fits in and general growth in the BR market. They also touch on the scenarios advisers may see to consider BR for their clients and the support available to them.
Henny Dovland, TIME Investments
When we look back over history, one thing has remained constant: There has always been financial uncertainty. And in every era of our lives, there have always been reasons not to invest, to keep cash, to avoid risk, or to put off making important decisions. Of course, the specifics change over time. But right now, in this melting pot of geopolitical, political, social and climate issues, making good decisions around tax, estate planning and investments can feel especially difficult for some clients. So, some individuals are choosing to do nothing. They’re pulling back from risk and not making decisions for the long term. And while this may make a person feel more comfortable emotionally, it can be very costly. Financial advisers know this, and a significant value add of taking advice is the ability to help individuals make sound decisions when anxious. This is especially true when it comes to estate planning. As well as the potential for a hefty 40% inheritance tax bill, there’s also the untold emotional burden for loved ones left without a plan in place.
How to support your estate planning business
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By Jessica Franks, Head of Investment Products, Octopus Investments
At Octopus Investments, we collaborate with the industry’s leading experts, including Greg Davies, Head of Behavioural Finance at Oxford Risk. Here, Greg shares his insights on how financial advisers can help clients prioritise estate planning during times of uncertainty.
octopusinvestments.com support@octopusinvestments.com
Head of Investment Products, Octopus Investments
Jessica franks
in conversation with greg davies
get educated
This new webinar series will equip you with the key information and resources you need to make the most of one of the biggest opportunities to add value there is: inheritance tax planning. The series covers key estate planning strategies, a range of client scenarios, how to engage with clients and the next generation and how to write Business Relief cases confidently. We also have an inheritance tax and Business Relief education hub to support you when writing inheritance tax business.
review your clienT bank
Review clients whose families could be impacted by inheritance tax. To help you deliver good outcomes when it comes to estate and inheritance tax planning, you can use our client planning scenarios. They’ll help you see how tax planning could support your clients.
get support from octopus
Our business development managers can give you additional support and education, or discuss a potential case you have. Additionally, if you have a client meeting and would like your local business development manager to come along to help answer any of the questions they may have, then get in touch. If you have any technical questions on estate planning then just ‘Ask Octopus’. Our estate planning helpdesk is there to offer technical support on all things inheritance tax and estate planning.
Explore planning scenarios >>
Ask Octopus a question >>
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Please remember, investments place investor capital at risk. Investors may not get back the full amount they invest.
For professional advisers and paraplanners only. Not to be relied on by retail investors. This communication does not constitute advice on investments, legal matters, taxation or any other matters. Personal opinions may change and should not be seen as advice or recommendation. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. Issued September 2024. CAM014364.
Watch now >>
It is about looking at how people make decisions, and how we can design tools to help them make better decisions
The BR Universe The inheritance tax net is widening and growing your estate planning business is a key opportunity Have smaller companies reached their turning point? Downing - Meet the Manager Inheritance Tax: The Future Under the Bonnet: Focus on AIM The adviser benefit of using client IHT planning scenarios Product in focus: The Zenzic Estate Planning Service About Intelligent Partnership
Carol is a retired civil servant in her mid-eighties. Her late husband left her assets valued at just over £1.5 million, which includes a home, a large investment portfolio and some savings. She has a defined benefit pension that covers her day-to-day expenses.
inancial advice adds tremendous value to clients during uncertain times and where a client feels anxious or reticent to make decisions for the long term. This is especially true of estate planning, where uncertainty and complexity can weigh heavily on families. The potential cost – both financial and emotional – of delaying inheritance tax planning are significant. Advice has an important role in ensuring good outcomes. An issue that comes up often in estate planning conversations and even more so in the current economic climate, is, what can you do if a client has a substantial inheritance tax liability, but they don’t wish to give away a large sum of money in their lifetime?
Carol thinks estate planning means giving up control of assets
Next steps
Look at Carol’s scenario in more detail. In this planning scenario we dig into the numbers to further show how a BR-qualifying investment could mitigate her inheritance tax liability. If you have a question on inheritance tax and estate planning, then one of our team of experts is on hand to help. Simply fill out your details and question or book a meeting and we’ll support your technical query.
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Carol meets with Ben, her financial adviser. Without any planning, her estate will leave her beneficiaries with an inheritance tax bill. Nonetheless, she raises a number of questions when Ben runs through her options, specifically around access and control.
Carol wants to decide what happens with her money while she´s alive. And she wants to pass on as much of her estate as possible to her loved ones when she passes away.
In a survey commissioned by Octopus in June 2024 , investors surveyed were aware of the more common inheritance tax planning strategies such as trusts, gifting and pensions. But only 31% were aware of Business Relief, an alternative way to plan for inheritance tax. And when asked, the majority of investors surveyed would want their adviser to talk to them about Business Relief. Introducing a client, like Carol, to the idea of BR-qualifying investments can be a good way to show that estate planning does not have to mean giving up access and control. Even if a client decides this type of investment is not for them, it can be a good way to unlock the wider estate planning conversation.
case study
Survey of 1,000 UK adults with investments partly or fully managed by an adviser, and 200 financial advisers, research conducted by Opinium for Octopus Investments, June 2024.
For professional advisers and paraplanners only. Not to be relied upon by retail investors. Important information. BR-qualifying investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client's financial situation, objectives and needs. This communication does not constitute advice on investments, legal matters, taxation or any other matters. Personal opinions may change and should not be seen as advice or recommendation. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. Issued September 2024. CAM014368.
Ben mentions investing in shares expected to qualify for Business Relief (BR). A BR-qualifying investment can be passed on free from inheritance tax on death, as long as it has been held for at least two years at that time. The investment would stay in Carol’s name, meaning she should be able to access some or all of the capital later on if she needed it.
Ben introduces Carol to Business Relief
Ben also explains the risks. It would involve holding shares in one or more unquoted or AIM-listed trading businesses, and the value of her investment, as well as any income from it, could fall as well as rise. Carol would need to be comfortable that BR-qualifying investments are higher risk than more mainstream investments, and she may get back less than she invests.
Carol should bear in mind that HMRC assesses BR when the estate makes a claim after she has died. Entitlement to the relief will depend on any companies she invests in maintaining their BR-qualifying status such that they qualify at that time. Tax treatment will depend on personal circumstances, and rules could change in the future.
Ben also makes clear that withdrawals can’t be guaranteed, as the shares of unquoted companies or those listed on AIM can be harder to sell than those on the London Stock Exchange’s main market. The share prices may also be more volatile.
Carol wants to know more about Business Relief
With a current average loan size of around £100,000, the Praetura lending teams have been in operation since 2013 and have made over £900m worth of loans to over 6000 businesses across the UK, spanning sectors including logistics, retail, manufacturing, services, technology and health. One of its current 4000 SME borrower businesses is Staygo Campers. Having been established in 2020, in 2021 the owners sought to finance the purchase of a new van and broaden the range of vehicles they offered for hire. It’s no secret that the main banks are often not an easy route for SME loans but this is where Praetura’s expertise lies – lending against security over real assets used in day-to-day business. For Staygo, this was £55,000 secured against a brand-new van. Make no mistake though, this process requires skilled underwriting, not least in the assessment of how to take control of the asset in the event of default, and to sell it to recover the value of the outstanding finance.
usiness Relief (BR) has been a key factor in the survival and expansion of family businesses for the last fifty years. But that doesn’t mean that all of the companies benefitting from it are past their early growth stages or that clients of Business Relief qualifying offers can’t provide secured loans to younger UK companies looking to scale. In fact, supporting the UK’s small and medium sized enterprises (SMEs) with Business Relief funding has developed into a successful investment strategy for Praetura’s Inheritance Tax Planning Service: Through funding a wide range of businesses and organisations across multiple industries, investors benefit from access to a highly diversified, secured lending approach.
By Sam McArthur, Partner, Praetura Investments
Robust returns and diversification
Fuelling SMEs
Risk warnings The information contained in this email does not constitute and should not be construed as constituting investment or tax advice by TIME. Past performance is not necessarily a guide to future performance and there is no guarantee that the target return objectives of TIME:AIM will be achieved. You should recognise that your clients' capital is at risk and investors may get back less than they invest. The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to Government legislation and as such may change.
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With zero capital losses to date and returns delivered in line with the target return of 4.5%, the steady and stable nature of this underlying trade is hard to deny. Importantly, this kind of underlying trade is much less common in BR qualifying offers than asset classes such as renewable energy and loans against property or property development. That makes it a very useful candidate when advisers are considering a crucial aspect of the use of Business Relief, particularly as investment amounts increase: Diversification. Diversification of counterparties and investment managers is a key foreseeable risk mitigator. But so is a mixture of differentiated commercial activities that offer varying methods of capital preservation and generation. Meanwhile, Staygo Campers now caters to Overlanders, large motorhomes, big campers and small Volkswagen campers as well. And, like many SMEs, the firm has expansion plans to open a site in the north of the UK from which to hire out a small number of vans and then potentially doing the same in Spain and beyond.
Diversification of counterparties and investment managers is a key foreseeable risk mitigator. But so is a mixture of differentiated commercial activities that offer varying methods of capital preservation and generation.
Given the success of the initial loan, this offers great potential for future natural deal flow for Praetura and that deal flow is another good reason why secured SME lending is a good fit as an underlying Business Relief trade. Every loan creates repayments at varying intervals. Currently, based on around £400m of outstanding loans, there are around £6m of regular repayments offering the kind of ongoing liquidity that gives Business Relief investors so much flexibility and control over their money. This all sounds like sensible planning that allows investment in the UK’s future economic growth as well as your client’s tax-efficient legacy.
Natural dealflow and liquidity
praeturainvestments.com investments@praetura.co.uk
Partner, Praetura Investments
Sam mcArthur
For investment professionals only. Investor’s capital may be at risk. Past performance is no guarantee of future returns. Tax benefits are subject to change and depend on the individual’s circumstances.
A Business Relief (BR) case through the consumer duty lens
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DRILLING DOWN INTO BR PRODUCT COMPARISONS
The number of Business Relief (BR) products available for retail investors has risen significantly over the last decade, making it harder for advisers to effectively compare products and find the right one for their client. Third party research is available for BR managers and their offers, including from MICAP, Tax Efficient Review, Hardman & Co and Apex, but it is also important to undertake your own research to ensure that it aligns with your own compliance regulations. Ultimately, you will be accountable to the FCA for the due diligence completed on those products that you recommend to your clients. Where you use third-party research, the FCA states that, “Firms should use a tool only where they are satisfied that it provides outputs that are appropriate and fit for purpose.” That means verifying with your third-party provider if and how their research considers the requirements of the Duty and understanding where this leaves your own internal research and due diligence requirements. There are some critical key differentiators that you should consider when comparing the various BR offers available. Those differentiators can vary across listed (AIM quoted) and unlisted (unquoted) offers. Initial comparisons should focus on whether an AIM quoted or unquoted BR offer would provide the best outcome to the client.
Control
AIM BR managers are rarely the main shareholders of the companies they invest in so do not usually exert any significant control over that company. Non-AIM BR managers have control of the company/companies into which your clients invests through an investment management agreement, so it is part of their role to ensure investors’ interests are looked after.
Governance
On the other side of the coin, while the level of governance and scrutiny on AIM is not as rigorous as a main market listing, it is still more robust than for unquoted companies.
Liquidity
Quoted assets such as AIM shares are visible to a readymade market of investors which generally means, under normal market conditions, that they are more liquid than unquoted BR companies, who generally rely on new incoming investors into the products to provide liquidity on fixed dates. If short notice access to capital might be required then it may be worth considering the difference between the two.
Valuations
AIM shares are valued by the market daily, supported by the intrinsic value of the business. Unlisted share valuations can be less transparent and are usually only updated quarterly.
While both AIM and unquoted shares are considered to be high risk, where the businesses derive their income streams from can differ considerably, with some unquoted offers seeking out more predictable returns from loan repayments or renewable energy generation subject to guaranteed Government subsidies.
Risk
Volatility
The value of AIM shares can be volatile and at the mercy of macroeconomic sentiment as well as individual company outlook. This has been shown over the last few years and you would need to consider whether your client could find these peaks and troughs challenging. While unquoted company valuations can be volatile, the nature of the underlying businesses held by unquoted products and security driven from assets or predictable revenue streams can significantly reduce this.
HOW TO DETERMINE WHICH BR OFFER IS BEST FOR YOUR CLIENT
The choice between BR products whose underlying investments consist of AIM quoted shares and those that do not will depend on the specific situation of the client to whom you are making the recommendation. Things to consider include:
Income
AIM shares may not produce much in the way of income yield and the lack of income can be an issue for some clients. Nevertheless, there are a handful of managers that build AIM-based BR portfolios do target growth and income and reasonable dividends can be found in some AIM listed companies. Unquoted BR companies cannot usually provide income in the form of dividends but can provide regular partial withdrawals to provide access to capital if required (for care home fees for example).
Cost and fair value
For quoted products there are indices such as NUMIS (that draw direct comparison to the market) or the ARC IHT portfolio index (that compares quoted IHT products against each other) that enable clear performance comparisons to be made against expectations. With unquoted funds, there is no direct index although product performance data is available.
It may be that a combination of strategies is appropriate allowing the client to access the benefits of both AIM and non-AIM BR services. Since selling and reinvesting in BR qualifying assets can be done without having to restart the BR qualification clock, it is perfectly possible to switch from one to the other as clients’ needs change over time. You should be careful though that clients are in good enough health that they are unlikely to die while not holding BR qualifying shares, as if they do pass away whilst holding cash, that cash allocated for reinvestment will be liable to IHT. For a more granular BR share offer comparison, see ‘A Technical Guide to Business Relief’.
TIME Investments is the trading name of Alpha Real Property Investment Advisers LLP, with its registered office at 338 Euston Road, London NW1 3BG. TIME Investments is authorised and regulated by the Financial Conduct Authority, under FCA number 534723. The information contained in this article does not constitute and should not be construed as constituting investment or tax advice by TIME Investments. Any views or opinions expressed are solely those of the author and do not necessarily represent those of TIME Investments. The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to government legislation and as such may change. Investors’ capital is at risk.
he Consumer Duty has now passed the anniversary of its implementation, and both the regulator and the financial services industry have been open about examples of good practice and areas for improvement. So, following on from our May Business Relief Update, we would like to share more pointers on Consumer Duty from the fourth edition of 'A Technical Guide to Business Relief’ which offers valuable practical and technical insights into the sector, including considerations on the latest regulations. TIME Investments has sponsored this popular adviser and paraplanner resource from Intelligent Partnership since the inaugural guide in 2018.
‘A Technical Guide to Business Relief’, Intelligent Partnership guide sponsored by TIME Investments
Third party research is available for BR managers and their offers, including from MICAP, Hardman & Co, Tax Efficient Review and Apex, but it is also important to undertake your own research to ensure that it aligns with your own compliance regulations.
Please click here to download your free copy of ‘A Technical Guide to Business Relief’
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n Intelligent Partnership’s recent Business Relief Benchmarking and Insights Survey, 'diversification of the underlying investment' is the second most important feature for Business Relief users when it comes to selecting a provider. It’s topped only by the provider’s track record of achieving Business Relief qualification. In fact, advisers use around three providers of Business Relief products on average for each case, although a quarter select five or more across which to spread their clients’ investment. Interestingly, in the survey, advisers reported investment risk as a much bigger challenge for their clients (over a third of advisers reported it as the top challenge) than performance concerns (just 6%). It’s true that Business Relief products aren’t renowned for offering earth-shattering returns, with the 40% IHT saving often viewed as the big draw. In fact, one adviser who answered the survey talked about the importance of client comprehension in the following terms, “client understands how it works and why actual returns could be mediocre.” But it is possible to diversify across returns, as well as counterparties and underlying asset classes, to positively impact Business Relief investment performance, as well as to take advantage of a selection of non-correlated business sectors and expertise. At Zenzic, we’re seeing an increasing number of advisers doing just that by adopting a core-satellite model when they allocate to The Zenzic Estate Planning Service (ZEPS), whereby the bulk of their client’s investment is allocated to larger (and therefore perhaps more liquid) funds, alongside a smaller allocation to ZEPS to increase total and blended returns and avoid over-reliance on a single manager’s performance. It’s the ZEPS market leading return that makes that possible: Since inception in Q4 2019, ZEPS has provided an annualised cumulative return approaching 6%, generally outperforming the average offered by other Business Relief investment managers by and impressive two to three percentage points. And offering a much less mediocre yield in comparison to the current BoE base rate.
By Thomas Lloyd-Jones, Chief Investment Officer, Zenzic Capital
zenziccapital.com | zenziceps.com info@zenziccapital.com
Chief Investment Officer, Zenzic
thomas lloyd-jones
At Zenzic, our specialised focus is a significant advantage. While covering 26 subsectors of real estate, we are adept at identifying areas where demand remains resilient, regardless of broader economic conditions, such as fluctuating interest rates. ZEPS extends secured loans to SME real estate groups, spanning various developers, locations, project sizes, and asset classes. This approach fosters a well-diversified, asset-backed portfolio.
Since inception in Q4 2019, ZEPS has provided an annualised cumulative return approaching 6%, generally outperforming the average offered by other Business Relief investment managers by and impressive two to three percentage points. And offering a much less mediocre yield in comparison to the current BoE base rate.
Not only can this approach bring more stability and discipline to a Business Relief portfolio, by removing the need for investors to fiddle too frequently with their portfolio to ‘pick winners’ or chase returns, but it can be customised to meet the desired return appetite and investment horizon. Since there will be important decisions to make regarding the core-satellite ratio, the asset allocation for each and the ongoing composition of the portfolio, the role of the financial adviser is particularly active and helpful in demonstrating their value to the client.
The ZEPS returns have been realised through a dedicated and specialised focus on a single underlying asset class that predates our Business Relief offering, and remains a strong investment opportunity even without the IHT relief component: Real estate credit.
Our strategic focus is centred on three key sectors, which we identify as high-growth drivers: residential property, self-storage facilities, and purpose-built student accommodation. With over a decade of experience in real estate lending, our team has cultivated the critical relationships needed to build trust and provide borrowers with the speed and certainty required in this market. This approach allows us to continually expand our robust deal pipeline and deliver consistent returns, significantly enhancing the performance of your clients' Business Relief investments.
About Intelligent Partnership
We organise focused events and provide a suite of materials to keep advisers and industry professionals up to date with the latest developments and on course to meet their training and unstructured CPD targets. Our range of engaging and accessible resources includes:
ntelligent Partnership is the UK’s leading provider of insights and education in the tax advantaged and alternative investments space.
A deeper dive into individual providers giving their input on particular market issues and more detail on the strategies and offerings they have developed to address them.
Provider spotlight emails
Our dedicated programme includes a variety of in-person and virtually hosted events, across the country. Supporting financial advisers and the tax planning community, we facilitate knowledge building of tax wrappers in a workshop environment. We host webinars and conferences that focus on specific areas of tax and estate planning, celebrating the role of the UK SME investment and finance communities through our annual Growth Investor Awards.
Awards, conferences, webinars and workshops
Our CPD tax planning online accreditation programme is aimed at regulated advisers, wealth managers, paraplanners, accountants and solicitors that require a recognised level of knowledge and understanding in EIS, SEIS, VCT and Business Relief. www.accreditation.intelligent-partnership.com
Accreditation
A weekly snapshot of the latest articles, commentary and market data for financial services professionals on tax efficient investment and estate planning. These are sent alongside our regular CPD emails, providing the opportunity to earn unstructured CPD time based on relevant articles and content provided by ourselves and external providers. Please retain a copy of all emails and publications to be able to claim unstructured CPD hours.
Weekly investment briefings
Free, award winning series including EIS, VCT, BR and AIM updates offering ongoing observations and intelligence, the latest thoughts and opinions of managers and providers, and a comparison of open investment opportunities. www.intelligent-partnership.com/ esearch-format/publications
Quarterly industry updates
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