This article is for professional investors only, and not intended for retail investors.

Last year, Ingenious ran an educational webinar when we revealed the ‘Six Golden Rules‘ which, in our view, one could apply when selecting the most appropriate unlisted Business Relief (BR) services for clients looking to conduct some proactive estate planning.

Since then, we have fielded many questions as to the priority in which one should apply those rules. Now we deliberately didn’t seek to prioritise them, as when applied properly they all could reveal a factor or issue about any service that might mean they are assessed as more, or less, suitable for a client.

However, one should remember that if the goal of estate planning is to pass on the maximum of a client’s wealth to their chosen beneficiaries when they die, anything one can do to ensure that a client is able to protect their estate, grow their wealth and mitigate the potential effects of IHT are what counts towards this goal.

However, in the same vein it is also possible to identify ‘Six Potential Oversights‘ anyone could make which might pose a risk to their advice, their clients’ outcomes, the beneficiaries’ wishes and ultimately retaining their business.

Not giving adequate consideration to “estate planning” efficiency

At a recent webinar, we were told by the audience that the primary motive to undertake estate planning is to eliminate, or reduce, the potential IHT burden clients’ estates will be subject to on their death*. However, this could be missed if one focuses on solely the investment risk present in any potential solution, as the IHT efficacy may actually play a much larger role in the success or failure of the proposed financial planning strategy. For example, should a client be invested in a lower risk investment within a solution which is only IHT effective after seven years and then the client dies after two, the advice has palpably failed the client. Bearing in mind the impact of IHT can mean a loss of 40% of the estate value, the result of not doing everything possible to eliminate IHT risk could be far greater that the assumed extra investment risk in doing so.

Being reliant on opinions, rather than facts

We all have a duty to understand the investments we recommend to our clients. As a result, many choose to utilise independent due-diligence to give them an easy snap-shot across the whole market to assist them in comparing rival managers’ services. However, this broad picture cannot be relied on in isolation and to provide the most robust process advisers should overlay their own judgement, having accessed all the relevant facts on these services. See our Six Golden Rules.

Unfamiliarity with all the costs, fees and charges of a service

It is noticeable that the fee models for a lot of unlisted investment services can be confusing and hard to assess and compare. However, it is vital to fully understand not just the magnitude of any investment costs, but how this may impact the performance of the service and what it may imply about the level of risk the manager is taking.

Many managers make a big issue of the fact they may only charge a modest annual management charge (AMC) if a set “hurdle” target is achieved over the life of the investment. What appears even better, is that they also suggest they will defer the taking of this annual charge until that exit point. In these cases it is highly likely the manager is also charging another annual fixed “service” fee which typically is greater than the other quoted AMC, and it is not contingent on any performance target and will be taken annually rather than deferred.

Lastly, understanding the full cost burden of any service can be a good indicator as to the level of risk being taken by the manager. Basically, to make a net positive return a manager must take greater risk for every percentage of fees they take to earn those fees back.

Misreading the way the investment service is valued

Not all unlisted BR services are valued the same way. Many services are valued and audited in order to calculate their Net Asset Value (NAV) but some then declare a separate, and floating, share price which may not match the audited NAV. If this is the case, and the share price is higher than the NAV, any incoming clients are buying shares at more than their “break-up” value which exposes them to the risk that should the trading company cease trading or needs to be broken up, they may only get back less than they invested and indeed thought that they owned.

Sacrificing investment performance for liquidity

Many investors value the concept of instant or fast liquidity in an unlisted investment. Many believe a service that offer redemptions in 10 days is superior to one that offers redemptions in 30 or even 60 days. Some managers also tell them this. But what if maintaining that liquidity impacted the level of funds actually deployed on trading activity? What if that faster liquidity actually meant holding significant capital back to meet those requests, which inevitably has a negative impact on investment returns? Why would the beneficiaries care if it took 20 days more when probate is typically taking more than twelve months anyway? Surely, they would want to have selected the service with the best estate planning effect so they get the best value and absolute maximum of growth?

Confusing size for quality

There can be a natural assumption that the biggest must be the best. But one should consider the impact AUM actually plays in the goal of effective estate planning. Does a larger office or more staff actually benefit investors? It’s our view that the previous metrics above are probably a far more accurate predictor of which managers and services offer the chance of achieving a better outcome to clients. So, deciding which metrics are the most relevant to the outcome clients are seeking is key to selection criteria.

As mentioned above these have been the key areas that seem to cause the most uncertainty and we believe we offer some answers but if have any more issues where you would like some clarity please contact us at

*Ingenious/PFS Webinar – Six Golden Rules – Oct 2021