Financial Planning

As we move into later life, our financial priorities often shift, and funding the potential cost of long term care is a common concern that is shared by many clients. This is not surprising, given the rapid increase in the cost of care over recent years. According to recent figures from Age UK, the average weekly cost for a place in a nursing home is £1,078, although there are substantial regional differences, and we have come across situations where clients are paying significantly higher fees than the average figure quoted.

Funding options

Local authorities have a duty to arrange and pay for appropriate levels of care, following an assessment of the individual’s needs; however, this financial assistance is only available to those with less than £23,250 in capital, and this figure includes the value of all assets, including property.

Depending on the needs of the individual requiring care, an assessment could decide that NHS continuing healthcare is available, which could cover some or all of the cost; however, if the individual is not eligible for continuing healthcare, and they hold assets greater than £23,250, they will be expected to make a contribution towards care costs.

Self-funding care costs can be a daunting proposition, where decisions need to be reached at a time of stress and concern when an individual is being moved into care. At this point, family members, or their attorneys if acting under a Lasting Power of Attorney, may find independent financial planning advice to be of significant value, to help consider the options and agree an appropriate strategy to meet the ongoing care costs.

Our approach to care fees planning

When we first meet clients who potentially have care needs, we undertake a full assessment of their capital assets. Quite often, we meet those who have investments and other assets that have not been professionally managed, and our analysis uncovers investments or pensions that could have been otherwise overlooked. Once we have assessed the capital position, we look at income sources (e.g. state pension, private pension, attendance allowance, investment or property income) to begin to work out the shortfall between the cost of care and other essential costs (such as personal care items and spending money) and their sources of income.

Once this assessment has been carried out, we can provide advice on the options for consideration. Depending on the level of shortfall, it might be the case that the care costs could be met through income alone, although this is not common and is typically reserved for those with significant personal pension or rental income. In most instances, the cost of care is likely to erode capital, with the rate of erosion dictated by the shortfall between income and expenditure. There is, therefore, a need to consider how best to meet the shortfall and preserve as much capital as possible.

Immediate Needs Annuities

One option that can bridge the gap between income and care costs is to purchase an immediate needs annuity plan. This is where capital is paid to a provider, who in turn will pay a monthly level of income that can be used to meet the shortfall between income and care fees. This income is usually tax-free and paid direct to the care provider.

Each plan is individually underwritten, with the single premium payable dependent on the age, health, life expectancy and care needs of the individual. In our experience, the premiums payable on such policies can be very expensive; however, despite this, some may value the certainty that a care fees annuity can bring.

A further factor to consider is that there is no return of capital to loved ones in the event of death of the individual in care, unless a capital protection element is purchased, at an additional cost.

Finally, the reality of how long an individual stays in care needs to be taken into account. Office for National Statistics analysis shows that for those aged 85 to 89 years in care, the average life expectancy is 3.6 years for women and 2.6 years for men. The purchase of a care fees annuity could, therefore, potentially only pay out for a limited period of time, leading to returns that offer poor value from a large capital outlay used to purchase the annuity.

Investment options

In many cases, adopting a sensible approach to investment from capital raised either from the sale of the main residence or other assets, is the preferred option. We provide advice to clients (or their attorneys or deputies) to construct a bespoke investment plan, after considering the level of shortfall and precise composition of existing assets held.

Cash will naturally have a part to play in any sensible investment arrangement where care fees are payable. It is, however, important that cash funds remain productive, and held in a tax-efficient manner. We can assist clients in establishing an appropriate strategy and provide advice as to the right level of immediate cash to hold.

For sums not immediately required, there are other asset classes, such as Equities, Corporate and Government Bonds and alternative assets, that could be considered to try and achieve superior returns to those available on cash. Our experienced advisers can recommend an appropriate investment strategy, which often focuses on lower risk assets, and aims to stem the rate of erosion, so that the capital can fund care provision for an extended period, or leave additional capital to loved ones on death. The strategy is then regularly reviewed, so that it adapts to any change in circumstances.

Naturally, there are many factors that need to be considered in any investment strategy, including the time horizon for investment, the tolerance to investment risk accepted and income requirements. Tax-efficiency and ease of access to funds will also be important considerations. We can also arrange regular withdrawals from investments at an agreed level to ease the administrative burden by moving cash to cover ongoing care costs.

Investing funds for someone else under a Lasting Power of Attorney introduces an added layer of responsibility. An attorney is duty bound to act in the best interests of the donor, and unless the funds available for investment are limited or the attorney has sufficient skill and knowledge, attorneys should consider whether they need to obtain independent financial advice. This advice can provide valuable reassurance to attorneys who are tasked with the responsibility of handling the financial affairs of the donor, and also provide evidence that appropriate advice has been obtained.

The power of advice

When an individual goes into care, decisions taken to fund ongoing care costs require careful consideration, to make the most of funds available. Our experienced advisers can provide independent advice on the options from across the market place and build a bespoke plan of action. Speak to one of our team if you, or a loved one, needs specialist advice in this area.

Irrespective of our age, financial obligations shape the decisions we reach on a day-to-day basis. For those with young families, the cost pressures of mortgage or rent payments, childcare costs and household bills undoubtedly take priority, and it is easy to consider longer term financial objectives, such as retirement planning, as being something that can be put off until later in life.

This is reinforced by the results of a survey carried out by the Department for Work and Pensions, published in 2022, where 2,655 people aged 40-75 were asked a series of questions relating to retirement and providing income in later life. Of those surveyed, 24% did not hold a private pension at all, and 16% had not started saving for retirement.

The reality is that failing to take control of your financial future at an early stage can lead to missed opportunities, which could compound over many years, and potentially lead to a less comfortable retirement. There are, however, a number of steps you can take to improve your financial future, and working out a financial plan with a regulated financial adviser can help you achieve your longer-term goals.

Take control of pensions

With the introduction of auto-enrolment, most employed individuals now hold and contribute to a workplace pension scheme. Indeed, as individuals move jobs, most accumulate a number of pension arrangements during their working life. Holding multiple pension plans can make understanding the overall value of pension savings, and the potential income in retirement they could provide, more complicated. Furthermore, keeping abreast of the performance of defined contribution pension funds is more difficult across multiple plans.

This is a crucial point, as the difference between strong performing investment funds, and those offering an average performance, can compound over years and lead to a significant difference in the accumulated value of your pensions, and the level of income that can be generated, at the point of retirement.

Default pension funds tend to produce broadly similar returns irrespective of the pension provider; however, taking an active role in selecting good performing investment funds can produce a significant improvement over the performance of the default pension option. Many pension arrangements now offer “lifestyle” options, which automatically reduce the level of risk as you near retirement. This automated approach may not be appropriate for the options you wish to consider at retirement and doesn’t take into account prevailing investment market conditions or economic prospects.  By engaging with a financial planner, an impartial assessment of your arrangements can be undertaken, which can help identify weak performing funds and allow changes to be made to improve performance or align the portfolio with your tolerance to risk and other preferences.

Performance is only one aspect where financial planning can assist in producing a better outcome. The charges levied by some pension contracts, particularly older style arrangements, can be expensive compared to modern platform-based plans, and these additional costs can be a further drag on investment growth within the pension fund.

Plan ahead to retire earlier

The State Pension age continues to increase and in our experience, many do not wish to continue working until their State Pension becomes payable. Engaging in the financial planning process at an early stage can make the possibility of retiring early a reality. Increasing the amount contributed earlier in life means that the contributions have longer to grow, and working with a financial planner can help adjust the contributions over time to ensure that they are affordable and invested appropriately.

Tax planning throughout your life

Tax relief received on pension contributions is one of the key benefits that sets pensions apart from other methods of retirement planning. Most individuals can get tax relief at their marginal rate of tax on pension contributions up to the annual allowance, which is currently £60,000 or 100% of relevant earnings if lower, although lower allowances apply to higher earners or those who have drawn a flexible income from their pensions.

Not only does the tax relief received on contributions provide a boost to growth in pension value, it can also help you avoid falling into a tax trap. One such example is the income tax charge that applies to people in receipt of Child Benefit, where either their income (or their partner’s income) is more than £60,000 per annum. Pension contributions made by an individual will have the effect of reducing the adjusted net income amount and potentially help avoid the income tax charge. Similarly, the 60% tax trap on income between £100,000 and £125,140 per annum can be avoided by making pension contributions to reduce adjusted income.

It isn’t just pensions where careful planning can yield tax advantages. Many people are finding they are paying more income tax on savings and investments due to static tax bands, and the reduction of the Capital Gains Tax (CGT) annual exemption is leading to more individuals paying CGT on the disposal of investments. By using tax advantaged vehicles, such as an Individual Savings Account (ISA), savings and investments can be sheltered from Income Tax and CGT.

Engaging with a financial planner can help identify opportunities to save tax throughout your working life, with each step towards greater tax-efficiency ensuring that your assets work as hard as possible to achieve your financial goals.

Don’t forget protection

One area of financial planning that is often overlooked is the need to protect your family’s finances, should an unforeseen event, such as death or serious illness, occur. Focusing on planning for retirement is all well and good; however, the best laid plans could be seriously compromised should the worst happen. It is important to ensure that adequate life cover is in place, and other forms of protection, such as Critical Illness cover, should be considered, too. It is also important to make a Will, to ensure your wishes are laid out, and ease the burden on loved ones. What is often not considered is that your Will can be a powerful tool that can be used to aid tax and estate planning.

Summary

With life’s pressures, younger people may be tempted to put off planning for retirement until later; however, in our experience starting a sensible financial plan at an early age could provide a more comfortable retirement. Engaging with a financial planner can also bring peace of mind that your financial circumstances are being reviewed regularly and promote tax-efficiency across your financial arrangements.

Our expert financial planners are independent, and can provide unbiased advice using a holistic approach, which takes into account retirement savings, investments, protection and other financial planning objectives. Speak to one of the team to arrange a review of your retirement savings or investments.

Decisions taken by central banks have been one of the main drivers of global market direction over recent years. Following the outbreak of the Covid-19 pandemic, interest rates around the World fell to ultra-low levels as policy makers attempted to stimulate demand amidst the global lockdowns. Just over a year later, interest rates began rising across Western economies to combat an inflationary spike, that saw UK Consumer Price Inflation (CPI) peak at 11.1% in October 2022.

As expected, inflation has fallen to more modest levels in most Western economies, and the UK is no exception. In the 12 months to April 2024, CPI has returned to 3.2% and is expected to continue to fall over the course of this year, potentially moving lower than the Bank of England’s own target of 2% by the autumn, although risks remain that inflation could modestly rebound in 2025.

Given the expected course of inflation, pressure is mounting on the Bank of England Monetary Policy Committee (MPC) to reduce the cost of borrowing and ease the burden on households and business alike. Of course, inflation isn’t the only indicator that the Bank are closely monitoring. The UK returned to growth in the first quarter of 2024, and GDP growth expectations have increased for the remainder of this year. Recent unemployment data was worse than expected and retail sales for April were very disappointing, suggesting consumer confidence remains weak. Understandably, the Bank do not wish to cut rates substantially, only to stoke the inflationary fire once again.

On balance, taking recent data and central bank comments into account, there is a large consensus that base rates will be cut in the next quarter.  Indeed, at the last meeting of the MPC on 9^th May, two members of the Committee, including the deputy governor Sir David Ramsden, voted to cut rates by 0.25%, with the other seven voting to keep rates on hold.

Source of Data: Bank of England

Bond markets are already beginning to price in a series of rate cuts over the next 12 months, with yield curves implying one or two cuts to the base rate in 2024. The outlook for rates has impacted the mortgage market, where lenders have been making modest cuts to five year deals, and in fixed-rate savings bonds, where rates being offered on one and two year fixed-rate bonds have also fallen from their peak.

The impact of rate cuts

When interest rates move lower, media focus will be targeted on the impact of the cuts on households. The outcome of falling interest rates on household budgets is generally well understood. For those with variable rate mortgages and loans, cuts in the base rate could lead directly to a fall in interest payments on a monthly basis. In turn, this could have a positive impact on discretionary expenditure, and lower rates could also encourage consumers to take on credit, from mortgages to car and personal loans. Consumers also feel more comfortable carrying a higher debt burden when interest rates are lower.

Those with savings begin to see a fall in the interest they receive on their variable rate accounts, and this may encourage those with accumulated savings to spend, potentially providing a boost to economic growth.

What is less understood is the significant impact underlying and future interest rates have on business, and in turn the health of the economy. Whenever the base rate changes, this affects the rates charged by banks on commercial loans, which tend to be arranged using a variable interest rate. The rapid succession of rate increases from the end of 2021 to August 2023 not only raised interest costs on existing business borrowing, but also has the effect of deterring businesses from taking on additional debt, further suppressing economic expansion.

How markets may react

Monetary policy decisions taken by central banks are one of a number of variables that dictate the progress and direction of financial markets. Cuts to base interest rates are generally perceived as being positive for both equities and fixed income securities. Equities benefit as companies can reduce their borrowing costs and more easily fund expansion. Depending on the sector, company profits may also benefit from more buoyant consumer confidence. Those companies who carry the highest level of borrowing tend to benefit the most from falling interest rates, which helps explain the recent strong performance of high growth companies, such as those involved in new technology, who tend to be highly geared.

The performance of bonds is directly linked to the future path of interest rates. As base interest rates increase, existing bond prices tend to fall, as investors can choose other options that offer a higher rate, such as newly issued bonds, or cash. The rapid increase in base rates during 2022 and 2023 proved to be very painful for bond investors, and saw bond prices retreat. The inverse is true when rates fall, as existing bonds offering higher rates look increasingly attractive compared to cash or bonds issued at a lower rate.

It is important to note that markets are forward looking, and have long been anticipating interest rate cuts in the US, UK and Eurozone. Indeed, markets have been frustrated by the slow march toward the expected rate cuts, although some of the concern has been offset by consistently stronger US economic data over recent months. Some of the positive impact of easing monetary policy has, therefore, already have been taken into account.

What action should investors take

As interest rates fall, investors would be wise to consider reviewing their existing financial arrangements in light of the changing landscape. Whilst cash has provided savers with attractive interest rates over the last 12 months, it is likely that savings interest rates will fall over the next two years, and those holding excess deposits on cash may do well to consider alternative options.

We feel a falling interest rate environment should prove positive for both equities and bond markets, and despite the strong performance seen since last autumn in anticipation of central bank action, the prospects over the medium term remain positive. Given the expected impact of a shift in monetary policy, this may be an ideal time to take another look at how your investments are positioned. Speak to one of our experienced financial planners to discuss the impact of falling interest rates on your investment portfolio.

In a little over a month, the UK will head to the polls in a much-anticipated General Election. The announcement by Rishi Sunak to call a General Election for 4^th July caught many observers off guard. Whilst not unprecedented, summer elections are rare, and many were expecting the Tory leader to call an election in the autumn or winter.

Thus far, market reaction has been muted, which is not surprising, given the relatively limited impact domestic politics can exert over global markets. It is important to recognise that global factors carry greater significance, with the Middle East, Ukraine and US economic policy decisions likely to provide greater direction than political decisions at home.

As both major parties begin to firm up their manifestos ahead of the election, one major theme adopted by both sides will be the importance of financial prudence. Whilst the economic outlook is improving, with UK GDP returning to growth in the first quarter of 2024 and inflation falling, the adverse market reaction to the mini-Budget in 2022, which caused Sterling to fall heavily and gilt yields to rise sharply, will be fresh in the minds of both parties when making spending pledges. Whether Jeremy Hunt remains as Chancellor of the Exchequer, or Rachel Reeves takes up the role, both are likely to tread carefully when announcing policy decisions over coming months.

Can history provide any clues?

To help understand how markets have reacted historically in the period immediately after UK General Elections, we have undertaken research looking back at the performance of the FTSE All-Share Index, which is the broadest measure of performance of UK quoted companies and captures 98% of the UK market capitalisation.

Our analysis shows that UK markets have historically produced a similar performance over the longer term under both major UK political parties. Looking at the tenure of each major party since 1997 (and not including the coalition government from 2010 to 2015) the average total return per annum (including dividends reinvested) from the FTSE All-Share index has been broadly similar under both a Conservative and Labour majority government.

The FTSE All-Share index has returned an average total return of 7.54% per annum under the Conservatives and 6.94% under Labour. Naturally, each period of control has encountered factors that have influenced global markets, such as the Global Financial Crisis of 2007-8, or the Covid-19 pandemic; however, it is interesting to note the broadly similar trend over time, irrespective of whoever is in power, which indicates – at least historically – that politics has little influence over the longer-term market performance.

A short-term boost for UK equities?

We have also looked at historic data to understand the potential for the General Election to be a catalyst for stronger domestic market performance in the short to medium term. In theory, an incoming government may be able to introduce greater fiscal stimulus, or boost public spending, as a result of their policy decisions. The same could, however, also be said for an incumbent government, who are emboldened to carry out manifesto pledges.

Our analysis of the UK stock market performance immediately after an election shows a similar trend, with the performance under both major parties being broadly similar; however, what is notable is the historic strong performance seen in the 12 months immediately after a change of government.

In 1997, when Tony Blair won a large majority for Labour, the FTSE All-Share index produced a total return of 35.6% over the 12 months immediately after that landslide victory. Similarly, under the coalition formed by the Conservatives and Liberal Democrats following the hung parliament in 2010, the FTSE All-Share produced a total return of 17.8% in the following year.

Comparing the returns in election years where power changes hands, to those where the incumbent party remains in power, indicates a marked difference in performance, with an average total return of just 2.5% being achieved by the FTSE All-Share index in the 12 months following a General Election when the ruling party retains power. This does, therefore, suggest that a change of government could prove beneficial for UK equities, at least in the short term.

Should investors be concerned?

Naturally, a General Election can cause uncertainty, particularly when considering any potential changes that will be implemented over the course of a parliament that could affect financial planning decisions. When it comes to market performance, however, we feel the upcoming General Election will have a limited impact, as the direction of UK equities markets continue to be dominated by geopolitics and global events, together with decisions taken by the Federal Reserve in respect of US interest rates. Indeed, we feel the US election in November has far greater potential to influence the direction of UK Equities than our own General Election on 4^th July.

That being said, we feel investors should take the opportunity to assess how their portfolio is positioned, both in terms of asset and sector allocation. Our experienced advisers can take an unbiased look at an existing investment portfolio, to make sure that the portfolio provides adequate diversification and meets your needs and objectives. Speak to one of the team if you have any concerns about the impact of the General Election on your portfolio.

In the first two parts of our “Behind the Scenes at FAS”, we gave an insight into the work of our adept administration and paraplanning teams, who fully support our team of financial planners. This collegiate approach ensures that advisers are afforded the time to spend with clients and pools the many areas of expertise across the firm to provide the best advice and service to clients.

Our team of advisers

The FAS adviser team is office based, although they tend to split their time between the office and attending client meetings, which can either be held at the client’s home or business address, or one of our two offices in Folkestone and Maidstone.

Led by the Directors, our FAS adviser team is made up of highly qualified and experienced individuals, the majority of which have at least twenty years or more experience in advice roles across the industry. We will continue to expand our dedicated team of financial advisers in line with our continued business growth.

Importantly, all of our advisers are employed by FAS on a salaried basis and none of our advisers are set targets for achieving certain levels of fee income. We feel this is of fundamental importance, as it allows our advisers to focus on providing the most appropriate advice and removes any notion of “sales” bias.

We appreciate that the adviser-client relationship often strengthens over time, and each client’s dedicated adviser is their usual main point of contact. It is, however, important to recognise that FAS is a team effort, and if an individual’s usual adviser is not available for any reason, another member of our advisory team will happily step in assist in their absence, wherever possible.

A team of all rounders

Working for an independent advice firm, our advisers need to be able to provide holistic financial advice, drawing on extensive knowledge in many different areas of financial planning. None of our advisers are “specialists” as each needs to be able to provide a high level of technical advice in a range of diverse areas, depending on the needs of a client. Typical planning requirements are pensions, investments, tax planning, divorce planning, trusts, and business planning. Other areas of expertise are also required, when client circumstances call for planning advice on personal and business protection, funding care fees or school or university fee planning.

An adviser’s role

As the name suggests, the primary element of an adviser’s role is to provide financial advice! This is either given during an initial, or review meeting, which is conducted face-to-face or through Zoom or Teams. During a client meeting, advisers make contemporaneous notes of the conversation and complete a detailed fact find, gathering the necessary information to be able to provide the most suitable advice. These notes and information are then logged as an ultimate record of the meeting.

Advisers also spend time each day dealing with client email correspondence and telephone calls. They regularly speak to Solicitors, Accountants, and other professionals in relation to queries which are relevant to mutual clients. We are strong advocates of this collaborative way of working, as it ensures that clients receive cohesive advice across common areas.

Working closely with our paraplanners and administration team, our team of advisers assist in the preparation of client reports following meetings, and ensure that comprehensive meeting preparation is undertaken before a client meeting takes place.

Highly qualified advice

To provide advice of the highest quality, the Directors place significant emphasis on study, learning and the achievement of relevant industry examinations.

The majority of our advisers have achieved Chartered status, which means that they have attained the highest standard of qualification in the industry, with others on a study path to achieving Chartered status. Being Chartered is not only an indication of technical competence, it also signifies an individual commitment to professional standards. Only a small proportion of the regulated financial advisers in the UK have achieved this status.

FAS follow a strict regime of continuing professional development, so that staff can keep themselves fully abreast of changes in legislation and reinforce their knowledge. Advisers are subject to an enhanced continuing professional development requirement and need to undertake a prescribed number of hours of learning each year, which includes structured learning.

FAS has also been awarded Corporate Chartered status in recognition of our commitment to professional excellence and integrity. Industry gold standards are not awarded lightly; the Chartered Insurance Institute sets this benchmark at the highest level based on advanced qualifications, an overall commitment to continuous professional development and adherence to an industry standard Code of Ethics. Our corporate title is not simply recognition for passing examinations or paying an annual fee; it is a public declaration of our commitment to excellence and quality in everything we do.

Product knowledge

A key element of an adviser’s role is to ensure that the most appropriate solution is recommended for a particular individual set of client circumstances. As an independent firm, we can recommend solutions without constraint, and therefore our advisers need to have an extensive knowledge of the features of products from across the marketplace and keep up to date with product and industry developments.

FAS – a team effort

Our diverse team consists of experienced, high qualified Advisers, Paraplanners and Administrators who, over the years, have been handpicked for their dedication, team spirit and client-centric focus. We all work closely together for the good of our clients. We prioritise client relationships, ensuring our focus is to always provide quality advice and exceptional service. All staff are integral to the running of the business and there is a mutual respect amongst colleagues for the role everyone plays.

Our experienced adviser team are committed to providing sound holistic financial planning advice. We are proud of our independent status, which enables our advisers to recommend the most appropriate solution to suit the needs of our clients. Whilst the advisers will be the main point of contact for our clients, the advice process is a team effort, requiring the skills and input of our paraplanning and administration teams.

We hope this article helps to reinforce the collegiate nature of our business and welcome any comments or queries you may have.

Many outside of our industry may not be familiar with the role of a paraplanner within a financial services firm. The National Careers Service defines a paraplanner as an individual that helps a financial adviser with technical and administrative tasks. Whilst this may be true, this definition barely covers the varied and highly skilled work undertaken by our own paraplanning team, which is integral to the continued success of the business.

Our paraplanning team

The FAS paraplanning team is office based and consists of seven staff split across our Folkestone and Maidstone offices. Boasting many years of combined industry experience, the team provide vital support in all aspects of the business, from report writing to financial analysis and calculations. We continue to strengthen our dedicated team of paraplanners to support growth in the business.

FAS paraplanners

It is fair to say that the paraplanners at FAS need to be skilled in several areas, as these various strengths are called upon daily depending on the nature of the job in hand. Primarily, the FAS paraplanning role is to compile client recommendation reports following adviser meetings. Working closely with the advisory team, our paraplanners have a major input in the preparation of the report letter, together with the collation of supporting documentation, such as illustrations and key features documents.

Our paraplanners often engage with clients in relation to reports that have been issued, and as a result, many FAS clients may well become familiar with some of our paraplanning team through direct contact.

A key element of the paraplanner’s role is to undertake the necessary research and analysis to support the recommendation being made to a client, involving the use of industry leading financial research software. The team often liaise with product providers to discuss how an investment is implemented whilst obtaining the necessary forms or documentation, as required.

As an independent firm of advisers, we can recommend financial solutions from across the whole of the market. Our paraplanning team take full advantage of our independent status when preparing recommendation reports by comparing a wide range of product costs and features, which are then discussed with advisers before completing the report.

Once a client proceeds with a recommendation, it is the responsibility of the paraplanner to check the returned signed documentation and notify our administration team of any important considerations, so that the implementation stage goes as smoothly as possible. There is ongoing daily communication between our paraplanning and administration teams to ensure adviser/client needs are adhered to and service standards remain high.

Qualified support

To ensure that the highest level of technical knowledge and support is given, all our paraplanners are at least Diploma qualified – the Chartered Insurance Institute’s Diploma requires the student to pass six examinations, covering all areas of financial advice, including regulation and industry ethics.

In fact, several of our paraplanners have reached Chartered status, which means that they have attained the highest standard of qualification in the industry. This helps demonstrate the importance we place on delivering the very best advice from highly qualified individuals.

FAS follow a strict regime of continuing professional development to ensure its staff keep themselves fully abreast of changes in legislation and reinforce their technical knowledge. Our paraplanning team are required to undertake a prescribed number of hours of learning each year, covering a wide range of topics. This ensures our paraplanners keep up to date with any changes in taxation rules, as well as regulatory requirements and compliance.

Meeting preparation

Our paraplanners often assist advisers in preparing the necessary documentation for a client review meeting. We provide a robust review service, and preparation is needed in advance of a meeting, so that an adviser has access to detailed performance return calculations and supporting evidence to aid discussion with a client. The paraplanner’s role here is not just limited to gathering and collating data, as advisers and paraplanners will work together to discuss financial planning opportunities that may require discussion at a client meeting, and the preparation of a meeting agenda.

Technical expertise

We often find that our clients have complex financial circumstances, where finding the right solution and strategy is key to successful financial planning. Our paraplanning team use their technical skills to prepare tax calculations, cash flow analysis and formulate strategic plans, in conjunction with the lead adviser, to ensure that the most appropriate recommendation is made to a client. Often specialist knowledge is required, for example where Trust planning or Inheritance Tax mitigation is the desired course of action.

Dealing with compliance

Compliance with regulatory requirements is a vital and necessary part of the role of a paraplanner. Our paraplanners need to ensure that recommendation reports are produced in a compliant manner, and that record keeping of the analysis and research undertaken to support a recommendation is correctly documented.

A team effort

The paraplanning team at FAS play a key role in the business, assisting advisers with key research, analysis, meeting preparation and the writing of recommendation reports issued to clients. Working in conjunction with our administration and adviser teams, our paraplanners also provide vital support to all other areas of the business, such as collating tax return information for accountants and portfolio details for probate cases.

We hope you have enjoyed this further look behind the scenes, and in the next and final part of the series, we will focus on our adviser team.

The last 25 years have changed the way we live. Now we can access information instantly, share experiences with people across the world, and reap the benefits of rapid technological change. These benefits include increased living standards and healthcare, and longer life spans. A longer life means your pensions and any other investment income in retirement have to last for longer; maintaining financial planning advice is more vital than ever to ensure you don’t outlive your income; and families may now stretch across more than three generations, making estate planning more of a challenge.

Financial planning for later life is, in many respects, the same as planning at earlier life stages. However, the emphasis will often change. For example, income will normally become a more important focus of investment than growth and planning for inheritance tax and potential care fees come to the fore.

Setting your goals

The first step in creating any plan is to decide what you want to achieve. There is no such thing as a standard, one-size-fits all solution – you need a personal plan designed around your goals. For example:

• What should the balance be between maintaining your lifestyle and preserving what you pass on to your family?
• Do you wish to stay living where you are today? Ultimately you may have no choice but to move to residential or nursing care, but in-home care can defer that transfer – albeit at a cost.
• If you are still working, perhaps part time, how long will you continue to do so before fully retiring?
• Are you prepared to rely solely on the NHS for your healthcare?

Careful income planning can be key to making the most of later life. Money concerns are never welcome, particularly if the opportunity to earn your way out of them is no longer open to you.

The transition from work to retirement is now often a gradual process. You might not want the instant change to 100% leisure time. Alternatively, you may need to earn extra income to cover a pension or other shortfall, perhaps because of the continuing increases in state pension age. Whatever your reason, national statistics show that men and women still work beyond their state retirement age. However, it is unwise to assume that you can rely on continued earnings for a long period of time. Factors such as your or your partner’s health, your enthusiasm, and the type of work you’re engaged in could mean you have to stop work at some point. If you think you will have to continue working indefinitely, then your non-retirement plans almost certainly need a serious review!

The role of pensions

Pensions, both state and private, are usually the main source of income in later life. For growing numbers of people, some pension income will be via income drawdown, rather than the traditional pension annuity. The drawdown approach offers flexibility suited to gradual retirement, but ongoing management is vital. The level of withdrawals needs regular review: taking too much from a fund can mean you outlive your pension, whereas the opposite could mean a lower than desired standard of living, thereby building up funds that your children, grandchildren or chosen benefactors will ultimately benefit from.

Investment management

What you require from your investments could alter over time and investment horizons naturally tend to shorten as you get older. For example, you may wish to increase the emphasis on security of income rather than income growth. To maintain a coherent approach, it is important to review your investments as a single portfolio, rather than as compartmentalised direct holdings, ISAs, life policies and pensions.

Tax

Income and tax sometimes seem inseparable, but this need not be the case. The flexible pension regime created ways to draw regular payments which are not fully taxed as income or are even tax free. Other investment structures can produce similar results if you think of your income requirement as a series of regular payments. For couples, tax savings can sometimes be achieved by simply rearranging who owns investments. The aim is to maximise use of an individual’s allowances and tax bands.

Long Term Care

Financial planning for social care is a highly complex area requiring specialist expertise. It had been made more complicated by the fact that, until September 2021, there had been no long-term plan for funding social care in England. Following new legislation, from October 2025 in England there will be an index-linked £86,000 cap on the total personal care costs (which excludes accommodation costs) that must be paid by an individual and capital limits will be raised for means-tested contributions, with the upper limit moving to £100,000.

Planning the future of your estate

You should ask yourself, what do you want to happen to your estate? That question affects more than inheritance tax (IHT) planning. Your estate and IHT are inextricably linked, but the most IHT efficient planning may not be ‘family efficient’ estate planning.

Protecting assets during your lifetime

The current and, to a lesser extent, future funding rules for long-term care can result in your estate being whittled down to pay care home fees. The average stay in a residential care home in England is around 30 months and average fees can exceed £1,200 a week in some parts of the UK. It may be possible to plan your affairs to limit the cost, but this is an area where in-depth knowledge is vital, and many dangerous myths exist – such as ‘just give it all away first’. To mitigate IHT, you should consider not only your will, but also any opportunities you have to make lifetime gifts. Today’s IHT regime has a favourable treatment for lifetime gifts. For example, outright gifts made more than seven years before death are completely free of IHT, as are regular gifts, regardless of size, when made out of income, provided that they do not reduce your standard of living.

Trusts

Trusts have long been used as a way of controlling lifetime gifts or legacies after they have been made. For example, a trust could be used to provide income from a portfolio for a surviving spouse, while also ensuring capital passes to children from a previous marriage when the surviving spouse dies. Trusts have often been associated with tax planning, but over the years legislation has been tightened. Now, most trusts are subject to the highest rates of income tax and capital gains tax, meaning that they can be disadvantageous from a tax viewpoint. Nevertheless, trusts continue to have a role to play, particularly when the would-be recipients of a gift or legacy are minor children or young adults.

Generation skipping

A five-generation family is a real possibility today, thanks to increased life expectancies. This can create some difficult estate planning decisions. Purely from an IHT viewpoint, the best option is to pass assets straight to the youngest generation, avoiding the tax that might otherwise be incurred on the trickle down through generations. However, the generations overlooked by such a strategy may be more in need of funds than their children or grandchildren. There might even be an expectation from the older generation of support with their care costs. As with so many other areas of later life planning, compromises may be necessary and sound advice essential.

How we can help

Later Life planning can be complicated with conflicting goals and uncertain timings. However, our experienced financial planners can provide advice on the following areas, so you are not alone. Please do get in touch if you wish to discuss any of these in more detail:

• IHT and estate planning
• Managing your pension arrangements
• Your options for funding long-term care
• Identifying opportunities to reduce your income tax bill
• Managing your investments, including pension assets
• The costs of downsizing and the alternatives available to you.

Whilst it is a topic we have covered previously, we make no apology using this week’s Wealth Matters to reinforce the benefits of independent financial advice, and potential pitfalls when using a restricted adviser.

Understanding the difference

Financial advice can be provided on either an independent or restricted basis; however, many people may not immediately understand the difference between the two. Firms need to clearly inform clients whether they offer independent or restricted advice when engaging with a client; however, many restricted firms do not do this, and thus mislead clients.

Independent financial advisers (IFAs) are not tied to any specific financial products, providers or investment institution, so they can offer impartial advice tailored to their client’s needs. In contrast, restricted advisers can only recommend certain products and solutions from a very limited range of options, and in some cases, will only be able to recommend products from a single provider.

Using a restricted financial adviser doesn’t necessarily mean you’ll be getting ‘bad’ advice, as all financial advisers must have a similar minimum level of qualifications and meet the same standards. It does, however, mean that the choices available as a client of a restricted firm may well be limited, which may lead to missed opportunities, or a sub-optimal solution.

At FAS, we choose to be completely independent so that we can research and recommend financial products spanning the whole of the market. In doing so, our advice is unbiased and unrestricted. We are very proud of our independence, and our ability to recommend the most appropriate product or service from across the marketplace helps us to achieve our aim of providing the best advice to clients.

Value for money

Some may make the mistake of assuming a restricted adviser will offer better value for money, as they perceive the amount of work undertaken in recommending a product from a limited range will prove more cost effective; however, this is not the case, and in our experience, the opposite is found to be true. We often meet new clients who have received advice from a restricted firm, and when undertaking unbiased cost comparisons, the restricted firm prove to be expensive compared to the cost of independent advice. One factor is our ability to look across the whole of the investment market and potentially access more cost-effective options that may not be offered through a restricted adviser.

What independence means to FAS

To help demonstrate the importance we place on our independent status, we look at three key areas where our day-to-day advice is enhanced by our independence.

1. Independence in fund selection

The UK fund management industry continues to grow in size with around 3000 funds being available to UK retail investors, covering both active and passively managed fund solutions across the widest range of asset classes, sectors and geographies.

Being an independent firm affords us complete freedom in the investments and funds we recommend are held within client portfolios. The FAS Investment Committee always take a wholly unbiased view when it comes to fund selection, selecting the most appropriate funds from across the whole of the market, without restriction. Comprehensive research and analysis is undertaken on all investment funds available to UK retail investors every quarter, and where funds pass our filters, we engage with fund managers to carry out more detailed analysis.

Funds that we currently recommend to clients need to fight for their place on our recommended list at each quarterly review. In the event that a fund underperforms, we discuss performance with fund managers, and have no hesitation in removing a fund from our recommended list if we feel better prospects lie elsewhere. Our focus on strong fund performance, together with our desire to access competitively priced solutions, can help our clients meet their financial goals, such as saving for retirement, more quickly.

2. Independence in product selection

As an independent firm, we always look to recommend the most appropriate product provider from across the whole of the marketplace. We undertake a regular whole of market review of platforms and product providers, considering factors such as platform cost, service levels received and changes in product features. This whole of market approach means that we can feel confident that the recommendations made to our clients are based on a comprehensive review of the full range of options available.

In a similar manner, we monitor and regularly review platforms that have been recommended to clients, and should a more appropriate solution become available, we have the ability to recommend that the client moves to a platform that provides lower costs, or improved levels of service.

3. Independence in financial solutions

A key benefit of our independent status is the ability to take a totally unrestricted view as to the solutions that would best fit an individual client’s circumstances. This is a particularly important element that supports our holistic approach to financial planning. For example, for those in later life, we are able to recommend esoteric investments, such as business relief solutions for inheritance tax planning, and for individuals who are seeking a high degree of tax efficiency, we can look across the range of Venture Capital Trust, and Enterprise Investment Schemes, if appropriate, given a client’s attitude to risk and objectives.

Why independence matters

We are very proud of our independent status, which we feel allows us to provide the best advice by being able to recommend products and solutions from across the whole of the market. If you currently receive advice from a restricted adviser, you may not be receiving poor advice; however, it may well be sensible to consider the limitations under which the adviser is working.

For example, the limited range of fund options offered by a restricted adviser could lead to underperformance, when compared to recognised benchmarks and peers. Given our experience, it may also be wise to review costs and charges, to see whether the restricted adviser is offering good value for money. Speak to one of our independent advisers, who are happy to take an unbiased and impartial review of your existing financial arrangements.

In our weekly Wealth Matters newsletter, we try to keep our readers up to date with developments in financial markets and information on financial planning opportunities. Reviewing the feedback we receive (which is always welcome!) we have been asked to provide readers with an insight into how FAS operates on a day-to-day basis. In the first of a recurring series of articles, we go behind the scenes to look at the role of the administration team at FAS and the vital role they play in providing excellence and high levels of service to our clients.

Our Administration Team

Our clients will no doubt build a strong relationship with their adviser, who they see face-to-face at review meetings or through other regular contact. FAS is, however, very much a team effort, with dedicated staff focused on ensuring that the administration of client assets runs smoothly. Our  strong administration team is office based and is split across the two offices, in Folkestone and Maidstone. Our team needs to be multi-skilled, as they handle all aspects of client administration, communication with product providers and providing business support.

Gathering Information

When we begin acting for a new client, it is imperative that we fully understand any existing financial arrangements they may have. To enable us to gather information, it is usual that we lodge a letter of authority, signed by the client, with the pension or investment provider. This authority allows the provider to forward information to us relating to a client’s existing investments, pensions, and other financial plans.

Naturally, we look to obtain this information as quickly as possible; however, the speed at which product providers respond varies from reasonable to incredibly slowly, and one of the administration team’s key tasks is to chase up outstanding information and responses from product providers. Our team are highly experienced and diligent in obtaining missing information, so that our advisers can provide the very best advice they can, based on the fullest set of information available.

Processing instructions

When a client follows our recommendations and proceeds with a financial transaction, our administrators deal with all aspects of the purchase, transfer, or sale, to ensure that the recommendations are followed precisely to those specified in the report. Our team always aim to process instructions swiftly and accurately on the relevant platform via an online interface, which ensures instructions are processed quickly.

Whilst most instructions are now dealt online via secure websites, some client instructions still require paper forms and applications to be submitted. This involves close liaison with product providers, and in the case of transfers from existing pension arrangements or ISAs, this will normally involve an element of follow-up and chasing to expedite the transfer. Given the poor level of service we receive from certain product providers from whom we arrange transfers, persistence and patience are key virtues that all of our administration team possess!

From time to time, platforms and product providers request further information or additional documentation at the time an instruction is lodged. Our administration team will contact clients directly as required to obtain further information, or if a signature is needed. As a result, some clients will get to know the administration team directly through this contact.

Preparing client reviews

When an adviser attends a client review meeting, it is vital that he or she is armed with accurate and complete information on a client’s investments, pensions and protection policies. Our client review service is fundamental to our business and ensures that clients receive a comprehensive review and regular contact at predetermined intervals. Given the importance we place on the value of regular reviews, a great deal of care and attention is afforded to the preparation of client valuation statements. The review preparation process involves dealing with product providers to obtain up to date valuations, and checking that the records we hold in respect of the number of units and holdings, prices and dividends match those records held by the product provider or platform.

Dealing with compliance

Compliance with all relevant regulations and following internal procedures are crucial to the smooth operation of the business. Our administration team have a key role to play here, confirming client identification and source of funds with product providers. By liaising with product providers directly, this frees up time for advisers to focus on their key role of providing advice.

Continuing Professional Development

All staff at FAS follow a strict regime of continuing professional development, so that staff can keep abreast of changes in legislation and reinforce their knowledge in all areas of the business. Our administration team fully participate in this professional development programme, to ensure that their knowledge is up to date. They also undertake regular training with product providers to make sure that the team are fully conversant with changes to platform services and procedures.

A team effort

The administration team at FAS play a key role in the business, supporting other staff in their day-to-day activities, and ensuring that client instructions are carried out efficiently and accurately. We hope this article helps to reinforce the collegiate nature of our business and the fact that FAS is far greater than the sum of the parts. We hope you have enjoyed this look behind the scenes, and in the next part of the series, we will look at the work of our paraplanning team.

With the end of the tax year rapidly approaching, it’s an ideal time to consider your finances and take decisions to maximise tax-efficiency. With the right planning, you can make the most of available allowances, exemptions, and reliefs, before the 5th April.

Use your ISA allowance

Individual Savings Accounts (ISAs) remain one of the most tax-efficient ways to save and invest. As the tax year draws to a close, it’s time to assess whether you have fully used your available ISA allowances. For the 2023/24 tax year, the ISA allowance stands at £20,000 per individual. This allowance can be split between a Cash ISA, Stocks and Shares ISA, Innovative Finance ISA, and Lifetime ISA (up to a certain limit). In addition, up to £9,000 can be invested in a Junior ISA, which can be held by a child up to the age of 18. This could provide a planning opportunity to make gifts to children or grandchildren which makes use of the Junior ISA allowance.

It is important to note that ISA allowances must be used in the tax year in question, otherwise they are lost. There is no facility to carry forward or make use of allowances from previous years. It is very much a case of “use it or lose it”.

Making Pension Contributions

Contributing to your pension is not only a prudent retirement planning strategy but can also be a tax-efficient way to reduce your tax bill. Personal pension contributions benefit from tax relief at the individual’s highest marginal rate. Higher-rate and additional-rate taxpayers can claim additional tax relief through their self-assessment tax return. The maximum contribution that can be made (known as the Annual Allowance) for this tax year is £60,000 or 100% of an individual’s net relevant earnings (whichever is the greater).

Pensions are complex and the annual allowances carry some quirks for higher earners, as the amount they can contribute into a pension could be limited. In addition, an individual who has flexibly accessed a pension will be subject to the Money Purchase Annual Allowance, which limits the level of contributions to £10,000 in the current Tax Year. We recommend you seek advice before making pension contributions, to ensure that allowances are not breached, as there could be tax penalties for making excess contributions above your available allowance.

Consider Capital Gains

With the annual Capital Gains Tax (CGT) allowance dropping from £6,000 in the current Tax Year to £3,000 in the next Tax Year, it is an ideal time to review an existing investment portfolio and make use of the annual CGT allowance. Whilst the rate of CGT payable on the disposal of investments is not particularly punitive (10% for basic rate taxpayers and 20% for higher and additional rate taxpayers) it may make sense to sell part or all of an investment to use the available allowance if you hold investments that stand at a significant gain over the purchase price. That being said, the decision to sell an investment certainly takes greater consideration than simply looking at the tax implications, and this is where independent advice can help you assess an existing investment portfolio to take the right decision.

Gifting for Inheritance Tax planning

The end of the Tax Year is a good time for those with significant assets to consider whether any simple planning for Inheritance Tax mitigation is appropriate. The easiest method of reducing the value of an individual’s assets is to make a gift, and gifts made within the annual gift exemption do not carry any Inheritance Tax (IHT) implications.

For the current tax year, the annual gift exemption is set at £3,000 per person, which means that you can gift this amount to one person, or make a number of gifts up to this total. Couples can benefit from making joint gifts, effectively doubling the annual gift exemption to £6,000. In addition, if you haven’t used the gift exemption in the previous tax year, you can carry forward any unused allowance; however, this can only be done for a single tax year.

Gifts with a greater value than the annual gift exemption are also potentially exempt from IHT, as long as the individual making the gift survives for seven years after the gift has been made.

The end of the tax year is, therefore, an ideal time to assess whether you wish to make gifts, so that available allowances are maximised.

Other Tax breaks

There are many other smaller tax breaks that can add up and minimise the amount of tax that you pay. As with many tax allowances, the end of the tax year presents a call to action to avoid missing out on potential tax savings.

Those who are married or in a civil partnership could benefit from the marriage allowance. This is only effective if one partner earns below £12,570 per annum, and the other pays tax at basic rate. The non-taxpaying partner could transfer £1,260 of their personal allowance to the taxpaying partner, which would mean an income tax saving of £252. You can also potentially claim the allowance for the last four tax years, if you were eligible and did not claim.

It is also worth reviewing your income position in relation to the Child Benefit High Income Charge. Making pension contributions could be an effective way of reducing net income so that a lower charge is applied, or removed completely.

Get the right advice

As we have identified, there are many opportunities to take decisions to maximise tax efficiency, many of which could be lost if not used before the end of the tax year. Successful financial planning is, however, far more involved than simply ensuring your investments and savings are tax-efficient, and this is where engaging with a financial planner can help assess your financial priorities and make sensible plans for the future. Speak to one of our experienced financial planners to carry out a review of your financial position and consider any actions that need to be taken.