This article is for professional investors only, and not intended for retail investors.
Speaking to advisers for many years now has allowed me to realise that a consistently challenging task they face is not only establishing the best route to take when offering estate planning advice to clients, but also in getting clients to accept it and then act. Without action, the best laid plans of both mice and financial planners won’t be successful and deliver value.
The reasons cited for this inertia commonly group around two systemic problems.
The first obvious one is the client normally has absolutely no idea when they are going to die. This poses an issue as nobody knows exactly how long the client has to act so generating any sort of urgency is impossible. It’s also due to this uncertainty in timing, nobody has any idea which plans would ultimately prove successful. Life insurance is the key exception to this as it would offer an immediate impact, but taking out Whole of Life insurance cover poses an indefinite ongoing financial liability; the exact opposite of the kind of clarity the clients would be after before taking action. Therefore any plan that can’t offer the certainty of being effective from an IHT perspective from Day 1 will be unattractive as it will inspire a lack of confidence and invite a delay in action. Either issue would prove to be a road-hump; both together are a cul-de-sac.
The second common issue is that if the client doesn’t have a crystal ball, they can’t know exactly what is in store for their financial fortunes and so can’t compute what their final IHT liability will be when they die. If they don’t know this, how can they possibly establish how much they can afford to part with or how much insurance cover they actually need (to afford)? Again, if clients neither have ongoing access to all their funds or know exactly what they can afford, they will find it near impossible to commit to a plan that deprives them of their assets in some way.
For these two main reasons, discussions over estate planning can all too often be held without the agreement of actually taking action on a specific plan. And as we all know, “failing to plan is planning to fail.”
So what’s important to solve this?
Ultimately if the plan you recommend to clients works speedily and allows clients to retain access to all their assets, you will have removed both of the main issues they find stops them from taking action.
Well, a survey Ingenious conducted during 2022 with PFS members when discussing these very issues showed us that 73% of active estate planning and later life advisers thought that a Business Relief-based investment service with life insurance built in would be “the ideal estate planning solution to offer clients.”*
This strategy utilises the best-aspects of two well-established estate planning techniques inside one specially-designed service arguably ideal for the task. The first part is the use of a proven Business Relief (BR) investment. This ensures that any money invested will remain fully accessible to the client until death, so whatever life holds for them, they have full control at all times. The service is also designed to grow over time and crucially should become fully-IHT exempt after just 2 years and stay that way whilst invested in the BR qualifying portfolio.
However, many advisers may appreciate there is a real risk of clients dying within that 2 years to IHT exemption. If that were to happen, the plan would fail and the investment would be subject to IHT. Hence the second part. The service also has life insurance cover specifically integrated alongside the investment so if this were to happen, clients would have their investment’s IHT liability covered. This life cover, being delivered at no extra cost, ensures there is no negative impact on the investment performance of the service.
All this means that advisers and clients alike can have confidence that should their advice be accepted and the client takes action not only should their IHT issue be alleviated immediately but they will have confidence that they will retain full access and control over the investment indefinitely. This will mean clients should be fully confident to proceed and there is no need for inertia.
A speedy service will promote speedy action to deliver a speedy outcome.
If you haven’t considered IEP Apex for your client’s IHT requirements, now is the time to do so.
*Ingenious survey – PFS Retirement and Later Life Roadshows – May 2022
Age and health restrictions apply. Refer to brochure for limits.
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