Last month we had just under 50 delegates attend our BPR masterclass, hosted at the BDO offices in London. We had speakers from BDO, St James’s Place, Bloomsbury Wealth, Ingenious, TIME, Puma and Oxford Capital and some key ideas emerged from the day – I’ve summarised them below:
1. There is a growing need for more flexible estate planning solutions that provide IHT relief without forcing investors to make irreversible financial planning decisions. Longer life expectancy means that people cannot gift money away that they may need for future living expenses – particularly care expenses. Products that utilise BPR are the only ones that provide IHT mitigation and allow ongoing access to the funds.
2. BPR products offer the swiftest possible relief for clients in ill health and uncertain that they will survive the seven years that other estate planning solutions require to become effective. BPR products qualify after just a two year qualifying period.
3. BPR products may be the only estate planning option available in situations where a Power of Attorney is in place. Gifting money is normally not allowed in this scenario.
4. BPR products can give younger clients continued growth, especially those that invest in AIM portfolios and are allowable in ISAs – providing equity level returns within a tax wrapper at the same time as mitigating IHT.
5. There are a surprising number of products in this market, catering to differing risk and return profiles. Some products are specifically aimed at business owners who may not realise that their business has an IHT liability – especially if the business has a lot of cash. Other products are aimed at addressing the possibility of future care costs. These products can help advisers meet very specific client needs.
6. Advisers must interrogate providers on key product characteristics such as performance fees and hurdles, levels of gearing, the nature of the underlying trades, levels of diversification and the provider’s own financial strength.
7. Many commentators don’t think BPR will be modified by HMRC in the near future. It’s possible that there may be changes, but as IHT is not a huge contributor to the Treasury’s tax take and the Nil Rate Band is by far the biggest relief, it doesn’t feel like a high priority. And as a statutory relief any changes would require time consuming primary legislation.
8. Ultimately, any investment in a product that utilises BPR will expose the investor to some risk. Advisers must assess this and be certain that the product is appropriate and suitable.
9. Both providers and advisers who are already active in this market expect to do more business into BPR products over the next five years. For advisers, this will be driven by their ageing client banks and rising asset prices. For the providers, it will be down to increased awareness of their offerings.
We’ll have the highlights video and interviews with the speakers ready to share with you soon
Thanks
Dan