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August 2020

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It pays to know the differences between independent and restricted financial advice

By | Financial Planning | No Comments

Do you know which is better, independent or restricted financial advice? Spoiler alert: there’s only one right answer to this… Independent advice is far superior, and we’ll gladly explain why.

What is ‘independent’ financial advice?

As the name suggests, an Independent Financial Adviser (IFA) will offer you impartial, objective advice on financial products and services. This means they will carry out research across the whole of a particular market to find the right solution to suit you personally. They won’t be biased towards any particular financial company or product, and they won’t base their recommendations on fees paid by other companies to encourage them to sell their products. If you get your advice from an independent financial adviser or financial planner, you can feel confident they are working solely for the benefit of you, and no-one else.

Being independent is a highly-valued status in the advice industry. To call ourselves independent, financial advisers must be able to prove their status to the UK regulator of financial services, the Financial Conduct Authority. If you’re not sure whether an adviser is independent or restricted, ask them. A financial adviser who can only offer restricted advice must declare this to you before making a recommendation.

How does restricted advice compare?

It all comes down to the options that the financial adviser can give you. Being ‘restricted’ means an adviser can only recommend products from a limited selection or product range, not from the whole of the market. Here’s an example that highlights the difference from a client’s perspective.

You arrange to meet a financial adviser to set up a personal pension. An independent financial adviser will research every relevant pension available within the UK market to find the one that they believe is best suited to your needs. They will then make a recommendation and provide you with the reasons that justify their decision.

With a restricted financial adviser, however, the recommendation process is different. The adviser might tell you that they are only able to suggest a pension from one pension provider, or from a select panel of a handful of different pensions. Your options could be drastically reduced, because they won’t have access to the widest choice of products available.

Why is independent better?

Using a restricted financial adviser doesn’t necessarily mean you’ll be getting ‘bad’ advice. All financial advisers must have a similar minimum level of qualifications and meet the same standards.  It just means that the choices available to you may limited, and this might not be in your best interests.

And, sometimes, getting advice that isn’t independent can be a problem. Restricted advisers will often work for a much larger financial services company – in which case they are probably keen to sell you one of their products. Alternatively, they may call themselves restricted because they only focus on one type of financial product (pensions, for example). So, if the restricted adviser recommends a pension to you, you can never be entirely sure whether it is the right pension to suit your needs, or just that he gets paid to sell this particular pension to you.

Independent financial advisers, on the other hand, are so much more than just salespeople. We believe that financial planning is more important than just recommending where you should put your money. It’s our job to find out about your goals in life, look at your personal circumstances and help you decide on the best course of action. In fact, recommending products is just a small part of what we do. We tailor our advice to suit your needs, and we will never recommend a product that we don’t think is 100% right for you, and will always give you clear and comprehensive reasons behind every recommendation we make.

Are independent financial advisers getting harder to find?

You may be wondering why advisers choose to be restricted, since being independent is clearly better for clients? The simple answer is that it is more expensive to be independent than it is to be restricted.

Being restricted makes it easier to run an advice business. A lot of smaller financial advice firms have chosen to become part of larger networks, which give them a panel of investments to sell to their clients. This makes it cheaper for them to run their business, because they can minimise their costs, outsource some of their functions and don’t have to spend so long carrying out painstaking investment research.

Being independent, on the other hand, means going it alone. This can mean paying more for professional insurance, training, and other regulatory burdens.

Don’t forget, most financial advice firms are themselves small businesses. Some have been hit hard by the coronavirus. In fact, the number of independent financial planners operating throughout the UK is shrinking. We’re not quite becoming an endangered species yet, but it’s sad sometimes to see that there are fewer of us out there flying the flag for independence. Because we believe people deserve the opportunity to get independent advice.

As for us, we have no plans to switch from offering independent financial advice to restricted. We believe that being independent means we can keep delivering better quality advice – and better quality outcomes – for our clients. We’re proud to say that all of our financial planners are highly qualified, have years of experience of financial planning – not just selling financial products – and are proud to call themselves independent.

So, if you’re ever in doubt over independent or restricted advice, remember this: a financial adviser who is independent will proudly tell you that fact, whereas an adviser who is restricted is legally required to disclose it. That should tell you everything you need to know about which is better.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

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Financial planning to help parents (and their kids) prepare for higher education

By | Financial Planning | No Comments

While coronavirus has made academic life full of uncertainty, the one thing you can be sure of is that it’s likely to prove expensive. But don’t worry, we’ve done our homework and put together some practical tips to help you start saving for university fees.

Private school fees – let’s start with the maths

The number of parents who choose to put their children into private education has fallen significantly in recent years. According to the Independent Schools Council, private schools educate around 6.5% of the total population of schoolchildren. That works out at around 625,000 children being taught in around 2,600 schools.

And of course, private education doesn’t come cheap. Based on current prices, sending a child to a private secondary school between the ages of 11 and 18 could mean spending more than £105,000 in total. Sending them to a boarding school could cost four times that amount.

So, unless you have that amount lying around, you’ll need to start investing as soon as possible. For example, if you start saving around £461 per month as soon as the child is born, assuming that you achieve growth of 4.5%, then you should be able to have set aside around £75,000 by the time they start their first year at secondary school. But the later you leave it, the more you will have to save each month (and please don’t get us started on the cost of school uniforms).

What about university fees?

Last year, a record-breaking number of young people enrolled on degree courses to UK universities. And in 2017, the average university student graduated with a debt of £51,000 (according to the Institute for Fiscal Studies). So, if you have children looking forward to university life in the not-so-distant future, expect the ‘Bank of Mum and Dad’ to be called on frequently.

And, if you want to cover their debt completely, you’d need to start investing £457 a month when they turn 10 years old (assuming a return of 4.5% over an eight-year period). Start investing from their first birthday, however, and the monthly amount you need to invest falls to a much more palatable £180.

Investing for the long term

As with any investment, the best way to reach your long-term goal is to hold a portfolio of different investments spread across major asset classes (such as UK and international equities, fixed income investments (bonds), and other assets such as commercial property). Once you’ve built up a sizeable investment pot, you might want to convert some of your investments into cash, to make sure you’re always ready to pay the school fees (a good rule of thumb is to always have three years’ of school fees in cash deposit accounts).

Make use of tax wrappers

You should always try to make use of any available tax wrappers to help you with your school fees planning. Don’t forget that each parent can invest up to £20,000 a year in a Stocks & Shares ISA. This will give your investment the chance to grow tax-efficiently, and you don’t need to declare your ISA on your self-assessment.

Making use of the Junior ISA

If you can, it’s well worth making use of the Junior ISA to pay for university fees. You can open a Junior ISA on behalf of your children and currently you can invest up to £9,000 a year. As well as being tax-efficient, you can also invite grandparents and family friends to contribute. The money can only be withdrawn by the child when they turn 18.

That’s great, but my little angel is off to university this year!

If you have children about to head towards university, don’t despair. There are tuition fee loans and maintenance support designed to help manage the expense.

The maximum amount that universities can charge in tuition fees annually is £9,250. It’s worth knowing that tuition fee loans (plus any interest) are repayable over a 30-year term. Repayments only kick in once the student has graduated and is earning more than £25,000 per annum. The graduate will be expected to pay back 9% of the income they earn over this amount, so if they find a job with a salary of £28,000, they can expect to pay £270 a year (or £22.50 per month) towards their total tuition fee debt. And, if there’s any debt left over after 30 years, it is automatically written off.

We can help you start to plan ahead

If you’re thinking about how to start setting aside money to pay for your children’s education, get in touch. One of our qualified financial planners will be able to talk through the options available to you, assess your attitude towards investment risk, and come up with a plan to help you – and your kids – achieve the best possible outcome. There’s really no better time to start than right now.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

China stock market graph ticker

China is constantly in the headlines – but is it a sound investment?

By | Investments | No Comments

Some of the recent headlines coming out of China have been troubling, to say the least. But if you’re looking for growth, there are plenty of good reasons to invest in the world’s second-largest economy. Here we outline some of the arguments for and against investing in China.

One of the hottest – and most hotly debated – investment topics of this year has been China. The world’s second-largest economy rarely seems to be out of the headlines, and most of them are disturbing. Back in June, the new security law imposed on Hong Kong, removing the region’s autonomy, was considered to have been China’s boldest – and most worrying – political manoeuvre in years. And just last month, Foreign Secretary Dominic Raab accused China of human rights abuses against its Uighur population, suggesting that sanctions from the UK government could follow.

Donald Trump’s favourite enemy

That’s not to mention the ongoing trade war between China and the US, and seemingly endless headlines expressing concern over state-controlled businesses such as Huawei and even TikTok (if you haven’t heard of TikTok, we suggest you ask your children or grandkids).

So perhaps the bigger question is, what is it about investing in China that makes it worth the risk? And would investors be better off avoiding the region altogether?

There are plenty of reasons why investing in China is a good idea

In pure investment terms, investing in Chinese markets can be a valuable way to diversify your investment portfolio. It has been one of the few regions to have performed well during the pandemic this year, and the returns from Chinese stock markets are not closely correlated to British or American stock markets. That’s a definite plus point during volatile times.

And there are longer-term reasons to be keen on China. As well as being the world’s largest exporter, China has a huge domestic market, and is home to some of the world’s largest companies that you may, or may not have heard of – like Alibaba, TenCent, PetroChina and Xiaomi. However, it is worth noting that Chinese companies don’t have a tradition of paying dividends, unlike companies in the UK. Investors look to China for growth, rather than income.

China drives the global economy

In many respects, China’s economy, which emerged from lockdown just as the rest of the world was entering, has a head-start on the rest of the world, and this is an advantage China intends to keep. And, for all the bad press China has been receiving recently, its exports seem to be relatively unaffected. China is tightly weaved into the fabric of the global economy, which has begun whirring again, so China is pushing its inventory stock out and increasing exports dramatically.

But China’s politics are leaving it with fewer friends

However, political risks around China appear to have increased dramatically – there has even been some talk of a new ‘cold war’ between the US and China. But President Trump’s bluster might quieten down if the US economy doesn’t recover enough to improve his election chances in November. And, with governments all over the world desperate to avoid a lengthy and damaging economic downturn, they may have no choice but to deal with Chinese businesses for the foreseeable future. Even so, the threat of wider-reaching sanctions, or stealth sanctions in the form of red tape and regulation changes, remain a threat.

What does the investment community think of China?

When it comes to China, two so-called inevitabilities are often taken for granted. First, that China’s economy will one day inevitably overtake the US economy to become the world’s largest. And second, that China’s investment universe will inevitably one day become fully integrated into the financial systems we enjoy here in the west. But both of those outcomes will only happen if China maintains good relationships with the rest of the world. Even with China’s impressive recent strengthening of its domestic economy, the stellar growth seen over the last two decades cannot continue if it becomes decoupled from its major trading partners. It won’t matter how valuable Chinese companies are if trade wars and sanctions make China an international pariah. And, while there has been huge demand for Chinese domestic assets from overseas investors recently, that demand could be dented if those assets come with big political risks, or could even result in capital invested in China being frozen as part of escalating sanctions.

For now, investors continue to back Chinese stocks, despite the rising geopolitical tensions. But at what point will the political uncertainties overtake the investment case? Recent events have shown that investors are justified in questioning the ethics of owning Chinese stocks. China’s economy is the second-largest in the world, but is easily the most controversial. It is perfectly reasonable for investors to now consider investing in China on a par with investing in other countries with poor human rights records, or non-ethical investment sectors such as tobacco, military-grade weapons or oil companies.


Whatever your views on China and its politics, it is an investment market that is hard to ignore. The sheer size of China’s economy, its continued growth and ever-increasing global importance, are all very good reasons for investors to consider increasing their exposure to China when building a balanced investment portfolio. But whether you think China deserves a place in your investment portfolio has now become a highly personal and political decision.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

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Getting the lowdown on BPR and trusts

By | Tax Planning | No Comments

We take a closer look at Business Property Relief, a little-known but incredibly useful planning tool when it comes to reducing inheritance tax, as well as explaining how it can be used alongside trusts for small business owners.

Did you know HMRC collected a staggering £5.2 billion in inheritance tax last year? In fact, every year, thousands of bereaved families find themselves facing an unexpected tax bill on their inheritance.

A quick reminder of inheritance tax facts

Inheritance tax is paid on the value of your estate when you die. Your estate could include your home, any other properties, savings and investments, and also any life insurance policies held in your name. Your estate will be completely free from inheritance tax if you leave it all to your spouse or civil partner. However, there may be an inheritance tax bill if you choose to leave some of your estate to family or friends.

If your estate is valued at less than £325,000 (known as the nil-rate band), there’s no inheritance tax to pay. However, your beneficiaries will be expected to pay inheritance tax at a rate of 40% on everything over that threshold. It’s important to remember that the inheritance tax due on your estate is paid by your beneficiaries (the people you choose to leave your estate to). They must pay the inheritance tax bill within six months of death being recorded.

Homeowners can also claim the ‘residence nil-rate band’, an additional allowance introduced in 2015. Provided the family home is left to direct descendants (children or grandchildren) a further £175,000 of inheritance tax relief can be claimed on the value of the estate. For married couples, any unused available reliefs can be transferred to the surviving spouse, meaning that it’s possible for a married couple to pass on an estate valued at £1 million, provided the family home is left to their kids or grandkids.

Could Inheritance Tax changes be on the cards?

There’s increased speculation that inheritance tax reliefs could be changing. The government’s response to the coronavirus – including furloughs for workers, business loans and grants and even ‘eat out to help out’ meal deals have cost the Treasury billions and blown a hole in the public finances.

As a result, there are concerns that Chancellor Rishi Sunak could be looking to claw back some of his ‘giveaways’ by closing some tax reliefs – with inheritance tax firmly in his sights. So, now might be a good time to think about ways to invest your money while making it exempt from inheritance tax – starting with Business Property Relief.

Understanding Business Property Relief

First introduced back in 1976, Business Property Relief (BPR) was brought in to make it easier for family business owners to pass on the ownership of the business to their descendants without leaving them with a large inheritance tax bill. But since then, BPR has expanded, and is viewed as a tax relief that encourages investment into trading UK businesses. Shares in a BPR-qualifying company can be passed on to beneficiaries free of inheritance tax. However, BPR only applies to trading businesses that meet HMRC’s qualifying criteria.

It’s worth knowing that you don’t have to be a business owner to be able to invest in BPR-qualifying companies, and there are a number of good investment management companies that give investors the opportunity to invest in portfolios of companies that qualify for BPR. As long as the investment has been held for at least two years, and is included as part of the estate, it can be passed on to the beneficiaries free of inheritance tax.

The key benefits of using BPR for estate planning is that it is flexible. Other ways of planning for inheritance tax – such as making lifetime gifts or placing money in a trust – means that you lose control over the assets. But if you’re considering investing in a portfolio of BPR-qualifying companies, it’s important to understand the risks involved. Your capital is at risk, and you may get back less than you put in. Shares in unlisted companies can also be more volatile and harder to sell.

Trusts explained

Setting up a trust can also help you to pass down more of your assets to your beneficiaries. Trusts are particularly useful where large sums of money are involved, where family relationships are a little complicated or where you don’t want children or grandchildren to receive the money until they reach a certain age.

There are many different types of trusts to choose from, but discretionary trusts are the most popular. Discretionary trusts are usually set up to provide money for a group of beneficiaries – for example, children or grandchildren, but a trustee is appointed to be responsible for managing the assets.

Any assets placed into a discretionary trust will be deemed outside of the estate for inheritance tax purposes, provided the person who set up the trust lives for a further seven years. However, inheritance tax may be payable (1) when the trust is created, (2) every ten years (known as ‘periodic’ charges) or (3) when trust assets are paid out to beneficiaries.

Combining BPR with a trust

If you’re a small business owner and you are planning on leaving your business to your spouse, you might want to consider combining Business Property Relief with a discretionary trust. This is a good way to ensure your estate will remain free from inheritance tax for your children and grandchildren, as well as for your spouse.

It is possible to arrange for shares in the business that qualify for BPR to be placed into a discretionary trust. A trust is a legal entity in its own right, which means that the trust ‘owns’ the business, rather than the surviving spouse. If the spouse chooses to sell the business, it won’t trigger a tax bill as the trust will own the proceeds of the sale, rather than the spouse.

Ready to have a conversation?

It’s not always easy to talk about what happens when you pass away. But you should have those conversations while you can, instead of leaving things till it’s too late. Estate planning can be complicated, and tax rules and tax reliefs are also subject to change. It’s important to sit down with one of our qualified financial planners who can explain the different options available to you, and work out a plan that will give you and your family peace of mind.

If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.