BR Guide FINAL 20 Feb

71 WORKING WITH PROFESSIONAL CONNECTIONS Accountants’ crossover with financial advisers and planners Business exits & replacement assets recommendations BR qualifying assets to reduce surviving spouse estate Pensions advice/alternatives ACCOUNTANTS’ CROSSOVER WITH FINANCIAL ADVISERS & PLANNERS There is also a great deal of “crossover” between what accountants do for their clients and what financial planners do for theirs. In fact, there is concern among accountants about the rising demand for financial advice from their clients. This puts them at risk of exceeding their professional expertise, particularly in the areas of pensions (mainly as a result of recent pension changes), income and capital gains tax mitigation and IHT. And this is expected to continue to increase. • ESTATE PLANNING: for individuals and small business owners. • EXITS AND REPLACEMENTS: accountants who have clients looking to exit their business but retain the BR they have through it can work with financial advisers to recommend replacement BR assets. • SURVIVING SPOUSE: when reviewing the estate value after the death of a spouse, an accountant realises that, when taking into account the assets left by the deceased, significant IHT will be due on the death of the surviving spouse. A financial adviser can assist with recommending BR qualifying assets that will be IHT exempt when passed on to the children. • CGT MITIGATION ADVICE • PENSIONS ADVICE SOURCE: BOWER PRIVATE CLIENTS SURVEY OF 105 ACCOUNTANTS, MARCH 2016 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Accountants who believe their work with financial advisers will increase over next 24 months Clients seeking IHT tax planning advice Clients seeking income and CGT mitigation advice Clients seeking pensions advice Accountants with concerns some of the advice they are giving goes beyond their core expertise Accountants that saw increase in demand for financial advice in last 12 months 45% 60% 61% 78% 31% 36% SURVEY OF 105 ACCOUNTANTS Understandably, there is some nervousness about passing clients to potential competitors. More often than not, it is down to financial advisers to give their partners in legal and accountancy firms the confidence that moving forward with some kind of referral based relationship is not a threat, but a way of accessing potentially significant, new commercial opportunities. One of the issues is that the problem might not ever come to the attention of a financial adviser: it tends to sit with an accountant who doesn’t ask the same sort of financial planning questions that advisers do. The fact that the business owner wants to exit but has concerns around estate planning doesn’t come to light, and they are never made aware that they have other options. This is almost the worst of all possible worlds, as very often the business declines in value as the owners age or lose interest – when in fact it could and should have been sold at the height of its value. Lawyers and accountants often come across the issue of a potential IHT liability, but do not always have the knowledge they need to provide solutions, and in particular to provide investment based solutions such as BR. In these instances, the option to refer to a trusted IFA can add another dimension to the service they offer their clients. So, as is the case with other tax efficient investments, it often pays advisers to leverage their network of professional connections to help identify potential clients. Benefits of Engaging with Professional Connections The advantages are by no means one-sided. Lawyers’ business models tend to be very transactional and many firms do not have deep ongoing relationships with clients where they seek to continually add value (and sell services). That means that breaking out of the legal silo makes sense, and smart legal firms are responding by forming relationships with financial advisers. They can take care of investment and financial planning related needs whilst also engendering an ongoing relationship with the client (even if only in annual reviews) which gives the lawyer previously unmined income as well as a more open-ended connection with their client. Many accountants used to offer financial advice (such as recommending a specific product), pre- FSMA 2000, but there are now various activities that they are no longer able to undertake, but which financial adviser firms can. Since, unlike most solicitors, they see their clients on a regular basis, they are in a better position to recognise when certain advice is called for, but which they are unable to provide. In these circumstances, some kind of mutually beneficial arrangement with an IFA firm puts accountants back in a position of deriving revenue from the client’s identified needs. Of course, advisers are in a position to benefit from new income streams and, in the case of estate planning, any interactions with new clients provide the opportunity of cementing relationships with the next generation. Successfully preserving their wealth to be passed down is a great way to secure future business within the same effective one-stop shop where legal/accountancy/financial advice can all be easily accessed. Any increase in a firm’s “professional standing” by association is also a welcome bonus. Beyond this, lawyers, accountants and financial advisers can all gain from increased knowledge from working with these other professional entities. Not only this, but tapping into the services offered by other professional services firms may free up resources for each of the service providers to focus more time on other functions where they are most profitable. For all involved, the increased depth of knowledge and services offered is likely to not only lead to higher customer satisfaction but also inevitably stronger client loyalty. ACCOUNTANTS FINANCIAL ADVISERS & PLANNERS