A guide to wealth management for high-net worth retirees by Equilibrium Financial Planning LLP

A Guide to Wealth Management for High-Net-Worth Retirees June 2017

Contents 03 04 06 08 09 10

An introdution to wealth management The importance of: A financial plan The importance of: An investment strategy The importance of: Tax planning The importance of: Inheritance tax planning How Equilibrium can help

An Introduction To Wealth Management We all want to protect our money as best we can, especially after working so hard to accumulate our wealth. At Equilibrium, we have the know-how and expertise to not only take care of your assets, but help them flourish. This wealth management guide will serve as a handy accompaniment for people considering their financial options, and explain the importance of creating - and sticking to a coherent financial plan. For high-net-worth retirees, effective wealth management is essential. Now is the perfect time to make your money work better for you. Retirement does not mean your days of making money are over - far from it. Whether you intend to pass your wealth on to your family, or to simply enjoy the fruits of your labour, it is important you make the right financial decisions.

As wealth managers we specialise in helping people increase what they already have, so we can advise you on the right decisions to take. This guide explains why wealth management is a necessity for high-networth retirees, from investments to tax planning and inheritance tax planning.

“We believe a financial plan must be heavily tailored and designed to maximise the potential of a person’s assets. This guide explains why.”

The Importance of: A Financial Plan It almost goes without saying that looking after your money is imperative throughout your life. However, when you reach retirement age, it can become even more important, with the way you receive your income shifting completely. For those who have taken home a regular income for the duration of their working life, it can be difficult adapting to this change. Effective wealth management, based on a strategic financial plan, can help you make the most of your assets and ensure your financial objectives are met. Whether through effective tax planning or sound investment, you need to make sure your money keeps working for you. Without a financial plan, you are less likely to set realistic goals and remain on track to meet them. By failing to identify your financial strengths and weaknesses, you are unlikely to build on the former and address the latter. Nor are you likely to put a plan into action and monitor its progress. A financial plan adds the organisation you need to make sure nothing slips through the net.

High-net-worth retirees: Managing money The way you, as a high-net-worth retiree, manage your wealth will likely differ to that of retirees with fewer assets. Although we should avoid overgeneralising, it is useful to consider the different attitudes to money that certain groups have.

For instance, you are likely to be particularly savvy with your money, and likely to have completed your retirement planning carefully, strategically and well in advance of your final working day. When it comes to using your money - or, indeed, how you make your money work for you - you are likely to: • Have specific goals for your money • Be keen to continue making money • Be smart with your money - understand that higher risk investments have the potential to generate a higher return, but also have the potential to fall quite significantly • Want diversification in your investments • Have experienced investment rises and falls making you better prepared to take the risks when needed • Know when to do it yourself or when to trust an expert

Seeking financial advice This last point is key. People who have accumulated significant wealth do not necessarily know the best decisions to make, but are willing to seek the advice of someone who does. Also, the effects of the financial crisis from 2008 will not have been forgotten, especially among investers keen to recoup any money lost. A financial plan enables you to be smarter with your money. A service tailored to match your personality and objectives will give you the best chance of getting the results you want.

The Importance of: An Investment Strategy Investment forms an integral part of a successful financial plan. It can be particularly important not to mention rewarding - for high-net-worth individuals with more assets at their disposal. By investing strategically, you can continue to grow your assets as you progress through life. Investment recommendations will vary depending on the individual. Portfolios are compiled to meet an individual’s needs, preferences and goals, and no two portfolios are likely to be the same. However, it is common for a high-net-worth client’s risk to be spread across a well-diversified portfolio - one that includes a mix of equities, property and alternative assets. Their portfolios tend to be managed on a more bespoke basis, especially when they are larger in size and include many different options. Where appropriate, this can often involve higher exposure to risk.

Greater risk capacity Although the level of risk depends on the individual, high-net-worth clients often have a high capacity for loss due to their capital or their high levels of guaranteed income. This is in contrast to people with fewer assets, for instance an individual not classified as high-net-worth might be more likely to invest into a portfolio with a higher proportion of lower risk assets.

There are notable differences between the financial needs of high-net-worth clients and those outside this bracket. High-net-worth individuals may find that they are often cited as the target market for the latest ‘flavour of the month’ financial products - products that are not necessarily the best fit. They are also more likely to either seek or be given advice from many different people. While this has its obvious benefits, it increases the likelihood of not following a coherent strategy - therefore hindering opportunities to get the best returns.

Targeted investment strategy It is therefore essential you follow an organised, coherent and targeted investment strategy, making the most of the assets at your disposal. Although you may have more opportunity to take on greater risk, your strategy needs to account for your personal tolerance for risk, how much risk you need to take and how much you want to. As a high-net-worth retiree, you are therefore advised to seek assistance, ensuring your strategy has the right mix. When constructing a strategy, emphasis also tends to be placed on spreading risk - a tactic aimed at protecting you from any sudden changes in the markets.

Diversification But what is the best way to spread risk? One of the most common methods is diversification. This involves investing in different areas, many of which have no connection to another. There are various ways to diversify a portfolio, and these include: • A mixture of assets There are various assets in which you can invest, including bonds, shares, property and alternative investments, while you can also opt for more ‘independent’ asset types, such as commodities and property • Different sectors Investing in different sectors could offer less volatility, as movement in some industries will have little effect on others • A spread of companies You can delve a little deeper by investing in individual companies either within the same or across different sectors. Again, risk can be spread further by investing in multiple businesses • Consider different regions To maximise the spread of risk, consider investing in different regions. This has value for many reasons, such as reducing dependence on one country’s economy

The Importance of: Tax Planning Tax planning is essential in the formation of an effective financial plan, especially given the complexity of the subject. Tax legislation rarely stands still - it is very fluid and changes regularly and is dependent on individual circumstances. It is therefore essential you stay ahead of the curve and do not suffer simply because changes have passed you by.

This is because tax planning is increasingly important with larger portfolios. People are often not aware of changes in relation to tax, and it can be difficult to actively manage tax on an ongoing basis. As a consequence, individuals may pay more tax than they are required to - and this can have a huge impact on high-net-worth individuals.

Through effective tax planning, you can ensure you keep on top of regulatory change and do not pay more than you are required. Income tax, inheritance tax and capital gains tax each have their own intricacies, and people will often need assistance to safely navigate these complex waters.

Tax mitigation strategy

Investment portfolio tax planning Tax planning with regard to investment portfolios is an often-overlooked area of financial advice. However, we feel it is essential this gap is plugged especially when it comes to high-net-worth clients.

A simple tax mitigation strategy, flexible enough to deal with change, can help you stay one step ahead, ensuring tax continues to work for and not against you. It is important to use the right tax wrapper best suited to your needs. Indeed, there are various tax wrappers compatible with larger portfolios. By selecting the right tax wrapper for the right investment, you can go a long way to ensuring your tax planning delivers the best results.

The Importance of: Inheritance Tax Planning

Leaving a sizable inheritance to family, friends or an organisation of your choice is something we all hope to do. It makes sense that the money you have accumulated throughout your life should be passed on to whomever you wish, giving them the best chance of making the most of their own life. However, inheritance tax is something that can make a serious dent in the amount you leave to your beneficiaries - so it is important you minimise the loss through effective inheritance tax planning.

Asset distribution Because inheritance tax is only due if your estate (which may include assets held in trusts and gifts made within seven years of death) is valued above the current inheritance tax threshold of ÂŁ325,000, and sits at a rate of 40%, it is imperative high-net-worth individuals can plan how best to distribute their assets. Inaddition, a new main residence nil-rate band is being phased in from 2017. By moving assets both at the right time and in the right way, you can reduce the amount of money you waste through inheritance tax. We recommend you consider an inheritance tax plan sooner rather than later, ensuring you are able to distribute your assets as you wish.

Effective inheritance tax planning and giving to charity It is important that calculations are made to ensure the value of your estate, and the subsequent inheritance tax levied on it, is correct. With these calculations made, you can enjoy greater peace of mind that your affairs will be managed comprehensively upon death. To whom you wish to offer gifts is another major consideration. As well as, or instead of, family members, you may be keen to support a charity or political cause. Indeed, you can stand to reduce your inheritance tax bill by giving to charity. If you leave 10% of your taxable estate to charity, the tax paid may be at a reduced rate - 36% instead of 40%. This is because any gifts made to a qualifying charity are exempt from inheritance tax, and if you leave at least 10% of the net value of your estate to such a charity - which is the sum of all assets after debts, exemptions, reliefs, liabilities and the nil-rate band have been deducted - you can qualify for the reduced rate.

How Equilibrium Can Help For retired high-net-worth retirees, effective wealth management organised through a sound financial plan is a great way to ensure you make the most of your assets. Having worked hard for your money all your life, itâ&#x20AC;&#x2122;s only right your money now works hard for you. This guide has shown that, as a high-net-worth retiree, you need to think a little differently when putting your financial plan together. There is no one-size-fits-all approach in wealth management strategies must be tailored to the individual, based on numerous factors. Among the main considerations are personality and objectives. Your investments, for instance, are based on your circumstances and the level of risk you are

comfortable with, while they must also meet your goals. It is therefore important to devise a coherent strategy with multiple factors in mind, such as investment, tax planning and inheritance planning. These are particularly important for high-net-worth retirees, keen to both continue making money and to ensure assets are passed on correctly. Although the financial plans of high-net-worth retirees often take a similar shape - they tend to diversify their investments and are more willing to take bigger risks with them, for example - it must be stressed that every plan needs to be different, specifically tailored to meet the needs of the individual.

We place great emphasis on understanding our clients from the very outset of our journey together. Our fact-finding exercises help us understand all we can about our clients and we draw up our financial plans with their significant input. From here, we help them make the right decisions, with our experiences and expertise complementing their personal wants and needs.

We can help you make the right decisions on investments, tax planning, inheritance tax planning, and all other aspects of wealth management. You know where you want to be - and we can help you get there. But don’t just take our word for it, here’s what some of our clients have to say:

“Equilibrium are very proactive in dealing with any problems and I am informed promptly of any transactions that have been carried out” - Derek “Equilibrium offer a professional service, good communication and a willingness to give advice on topics not directly related to our investments. We have found them to be friendly and personal” - Richard & Christine “We spent about three months talking to Equilibrium, we went to one of their seminars and had a couple of introductory meetings with one of their financial advisers and we were very comfortable, and made the decisions to move across to them” - Roger and Sue

Equilibrium Asset Management offers Restricted advice. Our investments are not like building society or bank deposit accounts, as the capital value and any income can rise and fall and your capital is at risk. The tax treatment of investments depends on your individual circumstances and may be subject to change in the future.

Head Office: Equilibrium Asset Management LLP Brooke Court Lower Meadow Road Handforth Dean Wilmslow Cheshire SK9 3ND Chester Office: Equilibrium Asset Management LLP 19a Telford Court, Chester Gates Business Park Chester CH1 6LT

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+44 (0)161 486 2250 +44 (0)800 168 0748 askus@eqllp.co.uk www.eqllp.co.uk

The information provided in this guide is based on our opinion and is for general information purposes only. It is not, and should not be construed as financial advice. You should be aware that the value of an investment can go down as well as up, and no guarantees as to the future performance, income or capital growth are given expressly or by implication.

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission.