BR report 2018

38 39 WHAT ARE THE ADVANTAGES / DISADVANTAGES OF INCLUDING AN INSURANCE OPTION WITH A BR PROPOSITION? We don’t think that it is in line with the spirit of the legislation. Anything that reduces the time that the investor might hold their investment for has the potential to reduce the amount of benefit that trading companies will get from the investment. Exclusions are another reason that we don’t offer cover - we want our investments to be easy to understand and to perform as expected. We would want to be able to guarantee that clients would JESSICA FRANKS OCTOPUS INVESTMENTS “Including insurance with BR is a positive thing. It alleviates the concerns that clients have from a health perspective. It allows them to not have to go through an underwriting process, which is what they’d have to do if they were taking out life care, or putting something into a trust where there was a discounted gift element.” ANDREW TUSTIN, PARTNERS WEALTH MANAGEMENT “Insurance builds in a guarantee that 40% IHT is going to be saved. But from our experiences, it challenges people’s views of their own mortality, and they don’t like to think about it. They think, I’m not going to die in the next two years, so why would I want that?” JEREMY GOODMAN, OCULUS WEALTH “Advisers should make sure that both the insurance and investment are suitable for their client, and that they are aware of any exclusions.” — JESSICA FRANKS, BUSINESS LINE MANAGER, OCTOPUS INVESTMENTS benefit from cover, and we don’t think any policy would enable us to give that level of assurance or clarity. DO YOU THINK THAT BUNDLING CAUSES A PROBLEM UNDER MiFID II? Irrespective of MiFID II, we like to make sure that the charges, risks and benefits are clear to clients. One of the challenges of providing insurance attached to an investment portfolio is making sure that the costs and charges are clear, both initially and ongoing. DO YOU THINK INSURANCE OPTIONS INCLUDED WITH BR PROPOSITIONS ARE MORE EXPENSIVE THAN THOSE AVAILABLE INDEPENDENTLY? IF SO, WHAT’S THE JUSTIFICATION FOR RECOMMENDING THEM? Insurance companies exist to make money, so on average any insurance policy will put you in a worse position than no insurance policy – the insurance company’s costs and margin ensure that. A single person insurance policy would be able to take individual client health features into account, but a group policy can’t. Some clients (typically those who are older or in poor health) will probably benefit the most from the group policy being cheaper than one they would take out themselves (if they could find cover at all), whereas those who are younger or in good health may pay more as a result of being in the least risky part of the group covered. However, if these “more expensive” clients are the only customers who take up the insurance option, then you might expect the insurer to cease to offer cover in the future if the policy becomes unprofitable, or to increase their costs to compensate. ARE THERE ANY MAJOR DIFFERENCES BETWEEN THE BR INSURANCE PRODUCTS AVAILABLE ON THE MARKET? All insurance policies are different and there is no reason why insurance policies that apply to different groups of investors would be any different, unless they are all provided by the same insurer. There may well be differences depending on what has been negotiated, paid for and agreed. Advisers should read the detail and decide whether what is on offer is suitable for their client’s objectives for the price payable, and taking into account all exclusions to the policy. THE ADVISER’S PERSPECTIVE... SUPPORTING GROWTH IN UK BUSINESS FIONA GRAHAM DIRECTOR OF EXTERNAL AFFAIRS AND POLICY AT INSTITUTE FOR FAMILY BUSINESS Family businesses are unique. Their strong values and long-term outlook mean they are the backbone of our economy, and the bedrock of our communities. In the UK, family firms generate a quarter of GDP and employ over 12 million people. By their very nature, family businesses take a long-term view, build on long-term stewardship of people and resources. Their commitment to passing something on to the next generation is locked into their corporate DNA. And the sector is extremely diverse – with businesses of all ages, in all parts of the UK, across every sector. And while most people think of SMEs when they think about family businesses, there are also around 17,000 medium and large firms. The long-term outlook of family businesses ensures they are often able to perform better during periods of economic uncertainty. But in order to do that they require stability and tax policies that support their ambitions to grow and plan for the long term. Transitions within family firms – be they in the management or ownership of the business – are times of significant opportunity but also provide challenges. Ensuring that these successful businesses are able to plan and continue to thrive after an ownership transition is important not only for the owners, employees and communities which rely on those businesses, but the UK economy as a whole. BR is a crucial relief from IHT that facilitates the transfer of family ownership of the businesses between generations – allowing them to focus on their long-term plans. Without BR, each time ownership of a business passed from one generation to another, successful businesses would have to be broken up and sold in order to pay an IHT bill. Some 85,000 family SMEs are estimated to transfer ownership of their business each year. BR gives these firms the ability to plan for a stable succession and plays a key role in ensuring that small and medium firms can focus on scaling up their businesses. Around 64% of family SMEs are estimated to be first generation businesses. BR gives these firms the opportunity to grow under stable ownership and successfully transition to the next generation, rather than seeing their potential for future growth lost after the death of the founder. BR is a positive example of how tax reliefs can really support and enhance business growth. The introduction, and maintenance, of BR has given business owners the confidence to really focus their efforts on building their businesses and competing globally, rather than looking inwards and impeding growth to prevent risking the future of the business after their death. The introduction of BR actually took away a disincentive for families to grow their businesses. As a result it continues to benefit the UK economy as a whole. BR is a significant pro- growth policy for business. And we hope to see that economic and social benefit being felt by communities up and down the UK for years to come.