Relationship building through our tax planning service
Hayley Broad, director and head of Research at Absolute Financial Management describes how the firm used its specialism in Business Relief to help build relationships with clients and professional connections
Having used Business Relief (BR) now for around three years, we have had a number of clients pass through the two-year qualifying period this year. What has been a nice touch by the providers we have used is the phone call we get from them alerting us to this.
We get a feeling of satisfaction when we hear this news as well as the information that the targeted return has been achieved, and of course, relaying the information on to the family regarding the saving we have just potentially made them is a delightful conversation and an excellent touch point.
One of the things I hear talked about in the industry is the lack of engagement in Business Relief by clients’ other advisers – namely solicitors and accountants. So how can the use of Business Relief engage such professionals?
Business Relief providers are keen to get in front of these audiences, however, organising such events can be arduous, time consuming and also met with reluctance. The way that we have engaged solicitors and accountants is by actually carrying out this planning for a mutual client, and showing them the results. It has taken time, but now we have a number of clients through the two-year qualifying period, we can prove its value. This is deepening the professional relationships we have, and now feeding through into our business results.
Proof of the pudding
A business we acquired in 2014 came with a number of landowning and exceptionally wealthy clients. It also came with an accountant who had strong relationships with these clients and was risk averse. Once we had explained the workings of Inheritance Tax Service investments (please see articles 1 and 2 in this series for information on this) to the accountant and invested for one family, he then gave his consent for us to discuss the relief and products with others. His endorsement has been key in getting clients agreements.
The first case we completed for one of these clients has now passed its two-year qualifying period. The adviser met with this accountant recently and relayed this news to him as well as the other result we hoped for – the companies we used had all met or exceeded their targeted returns.
The client, who had opted for income from the products, had received the anticipated steady income; the investment had delivered. The majority of the income she receives from the investment is paid by cancellation of units and profit is taxed under capital gains tax. As a higher rate tax payer who does not use her capital gains tax allowance, this also is a tax efficient income stream for her. Its simplicity and effectiveness is easy to see.
One family we are working with alongside this accountant, has inheritance tax problems for each generation. We have used Business Relief so far for the mother, and her assets invested in these products will pass through their two-year qualifying period in April 2017. We need to address the sons’ IHT problems, and will be looking to do this shortly after April, so providing us with a future business pipeline. In the meantime, having gained the trust of the family and accountant, we are working on their significant bonds, pensions and ISAs.
We are also now carrying out a large restructure of assets for this accountant’s daughter. While the advice on the use of Business Relief is of course not solely the cause of the broadening relationship with this professional, the way that we have put holistic plans into place for these clients, and part of the value of this advice can be directly measured in the IHT saving, has undoubtedly assisted. We are attracting high value clients, and bringing in significant assets under management.
A second way the use of Business Relief has helped us to bring on new clients is intergenerational planning. We have now had our first case through the qualifying period and death tested. The client, elderly and in ill health, passed away around four months after her investments passed through the two-year qualifying period. The two sons were known to the adviser, as he had requested their attendance during meetings when the recommendations were being made.
As a result of the success of the decisive advice given in both her ISA/GIA investment strategy and BR strategy, as well as the saving made in inheritance tax of over £150,000, we have now retained the existing business, adding both sons as clients, and also picked up additional business from the sale of the mother’s property, and the sons’ other assets. What’s more, the BR investments, having passed to the sons, are deemed to already be through the two-year qualifying period in their own names.
Tax planning, and not just in inheritance tax, is such a powerful tool with so many different allowances and reliefs available for use in organising assets in the most efficient way. Clients and their families are able to clearly see the benefit to them as well as put a number on the use of BR strategies.
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