BQ West Midlands Wealth Management Special Feature

WEALTH MANAGEMENT

SPECIAL FEATURE BUILDING TRUST

Clawing back credibility after the economic crash

EXIT STRATEGY

Planning ahead after selling your business

STAYING FOCUSED Clients belong at the heart of wealth plans

COMPANY PROFILE

WINTER 14

A distinctive approach to investment management Andrew Whiting Wealth Consultancy LLP is a Senior Partner Practice of St. James’s Place Wealth Management. As a Partner Practice they offer a wide range of high quality services to businesses and individuals whether the priority is to; preserve and build capital, gain financial protection, reduce inheritance tax liability and build provision for retirement.

Successful investment is critical for your future financial wellbeing, but it is a field which presents a unique problem: future performance is unpredictable.

To address this issue, clients of Andrew Whiting Wealth Consultancy can benefit from the St. James’s Place distinct approach to investment management as part of their personal financial plan. So how does the St. James’s Place investment approach look to achieve this?

• St. James’s Place only uses external investment managers for its funds; whilst other companies will have an interest in directing as much business as they can to the funds managed in house to maximize their own profitability. St. James’s Place has no such conflict of interest or investment bias.

• The Investment Committee of St. James’s Place appoints and replaces managers on behalf of all its clients, ensuring no client is ‘left behind’.

St. James’s Place does not wait to act if they have lost confidence in a manager.

• A range of investment styles are offered to provide a real diversification for clients, whether creating bespoke portfolios or investing in one of the range of growth and income portfolios • The managers are chosen for funds based on their skills rather than following benchmark.

St. James’s Place insists that its managers are truly active rather than passive.

• A peace of mind is offered by knowing that investment manager changes are implemented promptly and seamlessly. There are no explicit charges or capital gains or income tax implications for investors in the change.

A widely used method of assessing the quality of an investment manager is to look at their previous performance; however this can only give part of the picture. Some of the best managers

The St. James’s Place Wealth Management Group’s distinctive approach results in a global spread of investment managers, some of whom are only available to the UK retail market via St. James’s Place will occasionally underperform the market over a short period and equally the worst managers can sometimes achieve impressive performance.

Meaning, past performance can provide no guarantee of future performance. What can be done to monitor the manager chosen and to ensure that they are continuing to do a good job?

The approach recognises that no single investment house has a monopoly on investment expertise so a carefully selected number of external managers of outstanding ability are chosen to manage funds. The St. James’s Place Investment Committee ‘manages the fund managers’ on behalf of the client. In order to achieve the objective St. James’s Place has selected some of the best individuals within the appropriate investment they work for to ensure they remain appropriate for the fund they’re managing. If confidence is lost in a manager, the Committee will replace them, quickly and

efficiently. They are assisted by independent investment consultants Stamford Associates in this task. This results in a global spread of investment managers, some of whom are only available to the UK retail market via St. James’s Place.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

For more information on how we can protect your financial future please contact Andrew Whiting on 0121 215 0926 or email Andrew.whiting@sjpp.co.uk www.AndrewWhiting.co.uk

The Partner Practice represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/ products. The title `Partner Practice’ is the marketing term used to describe St. James’s Place representatives.

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WEALTH MANAGEMENT

WINTER 14

OVERVIEW

WE MUST REBUILD TRUST High net-worth individuals are more astute than ever before when it comes to wealth management and, in light of the damage caused by the recession, it’s vital they are given the very best advice.

Ian Halstead reports The world of wealth management was battered as never before when recession hit hard in 2008, and nothing suffered more than the relationships between high networth individuals and their advisers.

Just as the first casualty of war is the truth, the first casualty of the recession was trust.

Scandals on both sides of the Atlantic emphasised that the old practices were no longer acceptable, many advisers fell by the wayside, and the environment of wealth management changed forever – and for the better. Sue Knight, a director in Grant Thornton’s Birmingham office, specialises in strategic tax planning and wealth management for wealthy individuals, their families and their companies. Her mindset typifies the approach of advisers who understand that teamwork, precision and – more than anything – relationships must be at the centre of successful wealth management strategies.

“I think it’s vital for advisers to have not only the breadth, but also the depth of knowledge, and to have an international reach,” says Knight.

“Clients, especially high net-worth clients, are now more aware of the various elements of wealth management, which places more demands on their advisory team.

“There are still challenges though, >>

It’s vital for advisers to have breadth and depth of knowledge WEALTH MANAGEMENT

Sue Knight, director, Grant Thornton

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SPECIAL FEATURE | WINTER 14

OVERVIEW

WINTER 14

especially around what is tax avoidance and what is tax planning, and it’s easy to understand why some people are confused given the public debates on this issue.

“For me, the crucial distinction is looking at the commercial transaction behind what you are trying to achieve, on a client’s behalf.

As long as ‘commerciality’ is there, that is genuine tax planning.

“Saying that, the driver for decision-making is not necessarily a desire to pay the lowest tax. Often client concerns are more about having something which is robust and can’t lead to future reputational damage.

“The Revenue usually look at who someone is before they decide about prosecution or litigation, as they think if they target highprofile clients, they will often settle rather than fight and have the issues aired in public.

“Essentially though, it all revolves around trust. A client has to believe that an approach is fair and honest, so they need to really trust the adviser who is guiding them. ”I’ve worked with one very large client for 14 years, and although it takes a long time to build such a relationship, it’s not as unusual as you might think when mutual trust and respect is there.”

Knight says the new and more transparent approach to wealth management also means clients require greater clarity about tax matters.

“There’s a much greater focus about the scale of tax payments, when they will be due, and about taking risk out of taxplanning proposals,” she admits. “We’re also seeing more emphasis on putting long-term strategies in place, rather than thinking short-term.”

Another adviser very much in tune with the new environment is Andrew Whiting, a 25year veteran of the financial services sector, whose eponymous wealth consultancy is based on the Blythe Valley Business Park, near Solihull.

“The way we look to meet the varied requirements of our HNWI clients needs to be broken down into several facets,” he says. “Diversification is absolutely crucial, of both asset classes and strategies, but it’s equally important that you factor in the need to be flexible.

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Investors, especially with significant resources, are more financially astute than they have ever been “No client strategy will stay the same over a period of years, because inheritance tax (IHT), the changing needs of the client’s family, and estate planning will become involved, so right from the start, you must understand the client’s aims over the short, medium and long-term. “It might well be, of course, that some individuals are focused more on income, whilst others are looking for capital growth, but typically, we’d use a combination of trusts and IHT-friendly vehicles to deliver the best outcomes.

“Trusts have come under the spotlight, but we still believe the use of flexible trusts is an integral element of estate planning. As to the question of likely returns, there will always be debates to be had, but my philosophy is that if something sounds too good to be true, it probably is.”

Whiting is equally convinced that a comprehensive mix of asset classes will always generate the best returns.

“How you assemble an investment portfolio is always down to a client’s attitude to risk, but in general terms, I’d be looking to a range of different elements, perhaps gilts, and bonds, and UK equities, and quite likely overseas equities.

“It’s also important to diversify the range, and even the geographical location, of fund managers, so we might work with someone in this country, in the US and perhaps even in Australia.

“Investors, especially with significant resources, are more financially astute than they’ve ever been, so it’s important that you really get to understand them as individuals, to make sure you can fine-tune a wealth

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management strategy to generate the returns they desire, but also to guarantee them peace of mind.”

At the Birmingham office of Brown Shipley is Anne Brookes, who heads the team and has 30 years experience of the private banking sector. Like Grant Thornton’s Knight, she has noticed an increasing post-recession focus on the long-term.

“Activity has picked up across the local marketplace recently, and there’s no doubt clients are prepared to look well beyond the short-term to achieve their goals,” she says.

“I think the biggest difference now, from the bleak times we’ve seen, is that they are much more willing to consider tax solutions to protect their wealth, and that shift in mindset has been really marked over the last twelve months or so.”

Knight believes a major influence has been the Bank of England’s decision to keep interest rates at a record low of 0.5% since March 2009.“Funds haven’t been growing as quickly as they once did, the possibility of a rise in base rate still seems far away, and also, after the impact of the Retail Distribution Review, the market has calmed down a bit, and a lot of people have left the industry,” she says.

“We’re a small niche bank, and we’re not about product pushing, it’s more about building deeper relationships with clients and learning more about their needs, so I think that sits well with the changing times.

“There’s a greater need to build trust, and it does makes the work more interesting, especially when you get to know the wider families, but it also means that the process is much slower than it once might have been.

“Clients are more discerning, they ask more questions about potential exposure to risk, they want a more flexible approach, and noone ever walks in and just hands over a big cheque any more.

“The mood is definitely more buoyant though, so we’re constantly working with more clients, and we’re taking on more people to cope with the demand. We took on two more investment managers and an ‘apprentice’, earlier this year, and we’re expecting to recruit two more people by the end of the year.” n

WEALTH MANAGEMENT

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COMPANY PROFILE TAX CONSULTANCY AND PLANNING BRIEF

The challenges of tax consultancy and planning Against a hostile tax backdrop, how should businesses and senior executives approach tax consultancy and planning? Dan Hartland, head of Grant Thornton’s growing Entrepreneurial Private Client team in Birmingham, recommends some simple rules.

It seems that not a day goes by without some front page story regarding a celebrity or major corporation being berated for entering into an alleged tax avoidance arrangement. As a tax adviser, even my kids are looking at me suspiciously! In this current environment I would advocate a few simple rules to ensure your affairs are managed in a tax efficient but robust way. Firstly, keep it simple. There are some very valuable reliefs available for businesses that are non-contentious, such as R&D relief and the patent box. These do not only apply to technology businesses and we have had successful claims in sectors from waste management through to the automotive industry. Secondly, understand your options fully. In today’s world it is more important than ever that taxpayers find a trusted adviser who has the experience and expertise to both understand your business and advise on a range of relevant alternative options, clearly articulating the tax risks associated with each.

You will only be in control of your tax strategy if you are making an informed decision rather than “buying a product”. In addition, where there are grey areas, it is often now possible to engage with HMRC under a non-statutory clearance process to obtain more certainty, rather than taking unnecessary risks.

Thirdly, concentrate on your key business challenges and let tax support those strategies not drive them. For example, at Grant Thornton our clients tell us that one of their key business challenges is the battle for talent and there are currently a wide range of management incentives that can prove to be a very tax efficient and cost effective way to attract and

WEALTH MANAGEMENT

Dan Hartland.

Make sure you have a clear tax strategy to support your long term commercial strategy retain your most valuable assets. These are only effective, however, if they are designed with your employees and business objectives in mind so they support the behaviours that will deliver shareholder value.

Fourthly, remember the big picture. Most privately held businesses will be underpinned by a medium to long term strategy of either realising the value of the business or to pass the business on to the next generation. Typically this is one of the largest tax events that will happen in a shareholder’s lifetime and yet it is often the least well planned. There is an assumption that all shareholders in a privately

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held business will qualify for a 10% capital gains tax rate on exit. This is often not the case, but could have been. There is an assumption that shares will qualify for 100% relief for inheritance tax purposes. Again, this is often not the case, but could have been. In addition, often little thought has been given to what would be sold on a sale of the company and, without careful planning, shareholders are left with an expensive exercise of extracting non-core assets or investment properties prior to a sale when early action could have prevented such costs.

In a nutshell, make sure you have a clear tax strategy to support your long term commercial strategy.

Finally, don’t forget the key stakeholders.

Whether it is simple Will planning, insurances, using ISA allowances or pension planning, don’t let a focus on the business leave the key stakeholders neglecting their own affairs.

In my view the tax regime remains overly complex in many areas, but with some forward thinking, a clear tax strategy and good advice, there are still some really valuable and noncontentious reliefs and savings to be had. These can both mitigate taxation and drive value for businesses and their shareholders, so don’t be ashamed to use them.

It is, after all, why they are there.

For more information call Dan Hartland on 0121 232 5161 or email daniel.hartland@uk.gt.com

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A Lasting Legacy

Meridian SOLICITORS

Meridian Private Client LLP

Our specialist law firm is entirely focused on helping clients to protect their wealthwww.meridianprivateclient.co.uk through estate planning and long-term tax strategies. Our clients include those who are internationally mobile.

We work in partnership with our clients and their other professional advisers to deliver creative and practical solutions that will help secure the financial future of entrepreneurs and high net worth individuals and their families.

In addition to long-term tax planning, our services include advice on wills and trusts, the administration of estates and contentious probate and trust disputes.

info@meridianprivateclient.co.uk Wood Rydings Court, Packington Lane, Little Packington, Warwickshire CV7 7HN T: 01675 442430

www.meridianprivateclient.co.uk

WINTER 14

COMPANY PROFILE ENTREPRENEURS’ RELIEF BRIEFING FOR BUSINESS OWNER MANAGERS

Don’t miss out on the £1.8m tax give away for entrepreneurs Jon Croxford, partner and tax planning specialist at Meridian Private Client LLP. Entrepreneurs take a financial risk when investing in businesses. This is one reason why it has long been Government policy to tax capital gains realised on a disposal of an interest in an owner-managed business more lightly than most other types of investment.

Entrepreneurs’ relief provides owner-managers of businesses with significant capital gains tax benefits but, without planning ahead, it is easy to fall into one or more traps and to fail to qualify for what can be a very valuable relief.

Entrepreneurs’ relief allows business owners to be taxed at a flat rate of 10% on qualifying capital gains rather than the normal rates of capital gains tax of up to 28 per cent for a higher rate taxpayer. Each individual has a lifetime allowance of £10 million of gains which can qualify for the 10% rate and this can equate to a maximum tax saving of £1.8 million per individual.

Certain conditions have to be met for entrepreneurs’ relief to be available.

Firstly the business must be in the nature of a trade, not an investment. For example, shares in a property investment company would not qualify for relief. On the other hand, shares in a property development company would qualify. Particular difficulties arise when a business combines elements of both trading and investment. A common trap arises when a company generates cash which is surplus to trading requirements and which may even be used to acquire investments within the company.

To qualify for the relief, the investment element of the overall business must be “insubstantial” and HMRC treat this as meaning less than 20% of the company’s activities. If the company fails to meet this condition, the relief is completely lost.

Where a substantial part of a company’s activities is investment-related, there are various potential courses of action. These include reinvesting surplus cash into the trade,

WEALTH MANAGEMENT

Jon Croxford, partner and tax planning specialist at Meridian Private Client LLP.

The potential tax savings from entrepreneurs’ relief are substantial and it is worth taking professional advice distributing it to shareholders or splitting (“demerging”) the existing company into separate trading and investment companies.

If a full demerger is the best option, there are many tax and legal complications to consider.

The individual shareholder must also meet certain conditions. Assuming the relevant business is held within a company, the individual must hold at least 5% of the ordinary share capital and must also be an officer or employee, although not necessarily full-time. These conditions must be met for at least one year prior to the relevant disposal.

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Pitfalls here include having complicated share structures which may mean that a shareholder does not in fact own a qualifying 5% shareholding.

As long as you plan far enough ahead, it may be possible to change the shareholding structure to secure entrepreneurs’ relief for both husband and wife where they both have an appropriate role in the business, potentially increasing the tax break to £3.6m!

Complications can also arise where trading premises are held outside the company.

It is sometimes attractive before a business is sold to transfer shares into a trust for family members, in order to capture inheritance tax business property relief, whilst minimising the exposure to risks such as a divorce, but steps may have to be taken to prevent this from prejudicing the availability of entrepreneurs’ relief on the subsequent sale.

For many owner-managers, the availability of a 10% tax rate on disposing of their interest in a business will make more complex planning unnecessary and even counter-productive if it were to fail. However, it makes sense to plan to ensure that full use is made of entrepreneurs’ relief. The potential tax savings from entrepreneurs’ relief are substantial and it is worth taking professional advice. Don’t miss out! jon.croxford@meridianprivateclient.co.uk

Wood Rydings Court, Packington Lane Little Packington CV7 7HN Tel: 01675 442430 www.meridianprivateclient.co.uk

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INSIGHT

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PUTTING TOGETHER THE JIGSAW For a strategy to work effectively, all the pieces have to fall into place. Only then can it meet a client’s needs. Ian Halstead reports

Assembling a team of advisors to deliver a successful wealth management strategy isn’t easy, but without the right blend of skills and experience, the desired outcomes can’t be achieved. Sarah Nash, a senior associate in SGH Martineau’s private client team, aptly describes the process as like putting together a complex jigsaw.

“It’s all about teamwork, so every piece has to be in place; the lawyer, the accountant, the financial adviser, the financial manager and the investment manager,” she says.

“It’s always said that there has to be a bond of trust between the client and the lead adviser, but there also has to be trust and understanding between every member of the team.

“One of the recurring themes of the postrecession environment is that high net-worth individuals are now intent on preserving wealth for future generations and, allied to a desire to mitigate taxes, they also want to protect that wealth from divorce or bankruptcy.

“Obviously, the financial services element is absolutely critical to successful outcomes, but although it’s all well and good taking advice about your investment portfolio, clients also have to ensure that a solid legal framework is holding everything together.

“It’s vital to have the right sort of will and power of attorney in place, and the lasting power of attorney too, in case

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someone suddenly loses the capacity to run their business.

“It’s been traditional for people to put their estates into trust for the benefit of their family and children, but because of recent legislation we are seeing a trend towards non-trust solutions.

“The most important aspect of any wealth management strategy though, is to plan as far ahead as is reasonably possible, and to always review and reassess that strategy whenever circumstances change.

“Everyone in the team always has to be mindful of legislative changes too, around pensions at the moment in particular, but it could be anything which might impact on a client’s strategy.”

Stephen Harper, founder and chief executive of the Cheltenham-based wealth management agency, Attivo, which has more than £500m of funds under its control, says it’s also critical that clients take the time to identify the right financial planner to best deliver a successful strategy.

There has to be trust and understanding between every team member

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SGH Martineau’s Sarah Nash

“It is hard to identify the right people, but it will make such a difference,” he says. “I don’t think high net-worth individuals should ever go to a one-man band, as they just won’t have the resources or the depth of skills which are required.

“I’d always make sure your chosen firm is chartered and that it’s genuinely independent, so you aren’t simply being offered products from a single provider.

That approach could generate decent returns, but you can’t get the best returns without access to the full market.

“Clients have to be happy with the service proposition, and be confident their requirements for income and capital are fully understood. Saying all that, it’s ultimately about how well the team is managed, and how the different skill sets sit together for the client’s benefit.

“I think a lot of mistakes are made because too many demands are loaded on to a single person, and unfortunately, it’s not until things go wrong that everyone realises what has happened, and there is nothing more frustrating for a client. “Yes, there has to be a single point of contact at the wealth management specialist you choose, but that individual should be your financial planner because they’ll understand the structure and detail of your strategy, and know when to access the specialist accountancy or legal skills within your team.” n

WEALTH MANAGEMENT

TOGETHER WE ARE NO. 1 We are delighted to announce that our Private Client and Family Teams have again been ranked in the top tier of Legal 500, one of the UK’s top legal directories.

Mary Kaye, Head of the Group, led the way along with Team Heads Lesley Davis and Zahra Pabani.

We offer a comprehensive range of legal services including Wills, Trusts, Family Law, Charities and Probate Administration.

Contact us: T: 0800 763 1441 E: carla.vry@sghmartineau.com

sgh Birmingham London Brussels www.sghmartineau.com SGH Martineau LLP is a Limited Liability Partnership

COMPANY PROFILE

WINTER 14

From success to succession planning Stephanie Churchill and Nicole Andrews from Churchill Taxation say now is the time to put succession planning back to the top of the business agenda.

Many owner-managed and family businesses are tentatively heaving a sigh of relief as they begin to emerge from what felt like the very long and extremely painful corporate darkness of the last few years.

Some of these businesses will have previously given thought to succession issues, but very few will have made it their priority over the last few years when survival became king. But is now the time to start thinking strategically again?

At Churchill Taxation, we believe the answer to this question is yes. There comes a time for every owner-manager when they need to need to take a long, hard look at their own personal position. When do they want to retire? How will they possibly be able to retire? What income will they have to live on in retirement? How many business owners can answer these questions with any certainty? How many business owners have their own ‘personal advisor’ (as opposed to the company advisor) who they can talk through these issues with? These are undoubtedly scary (and sometimes uncomfortable) issues but they are ones that need to be addressed. What happens if the owner doesn’t make it through to retirement? What would happen to the business then, if he or she died? Would the business be able to function without them or would everything they had built up crumble around the family’s ears. These are just a few of the many questions that need to be answered before a family or owner-managed business can plan strategically for its future.

So, once the owner-manager begins to think about their ultimate exit from the business, what are the options available?

There are four basic options which would allow an owner-manager to exit the business: • Pass their shares to family members or partly into a family trust;

Stephanie Churchill and Nicole Andrews.

• Appoint an external management team to take the business forward whilst retaining their founder shares as an investment; • Sell their shares either through an external sale or through some kind of management buy-out or • Liquidate the company. Each of the options has its own commercial and tax implications and the final outcome will depend upon the objectives of the individual concerned and aspirations for the future of the business. It is crucial that professional advice is sought before any final decisions are made. Even if the prospect of retiring from the business seems like a distant dream – it is important that owner-managers begin the thought process now. Not next year, or in five years. No-one knows what is around the corner. For example, if the ultimate intention is to sell, now is the time to begin grooming the business in anticipation of the sale.

Or if the intention is that key management will take the business forward, now could be the time to put the necessary steps in place to identify the key personnel and to ensure that attractive tax-efficient incentive plans are available to encourage them.

Is now the time to start thinking strategically again? at Churchill Taxation, we believe the answer to this question is yes

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Even if the intention is to take the “easy” option of passing shares to other family members, there are still some serious decisions to be made. How many shares should I give? When should I give them? Should I pass them directly or through a trust? How do we prevent a tax charge arising?

One thing is for sure, succession planning doesn’t happen overnight. Although the temptation may be to wait until “a more convenient time”, the truth of the matter is that there will never be a right time, so why not start to plan for the future today. Now is as good a time as any.

For more information on making succession successful and to find out more about the full range of tax advice available to entrepreneurial private clients from Churchill Taxation please contact Stephanie Churchill or Nicole Andrews.

Stephanie Churchill T: 0121 632 2008 E:stephanie.churchill@churchilltaxation.co.uk Nicole Andrews T: 01905 854894 E:nicole. andrews@churchilltaxation.co.uk

WEALTH MANAGEMENT

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COMPANY PROFILE

Investment firm marks two decades in city IT was the year that Time Magazine did a cover story on the next big thing in technology – the internet – but had to explain to its readers exactly what the internet was. It was also the year that a little grey box that would change the lives of teenagers (and their parents) forever made its first appearance on the shelves of electronics stores in the UK. That was 1994 and in the same year that PlayStation was taking over our living rooms, one of the UK’s leading investment management companies set up its new office in Birmingham with just 3 staff, hardly any clients and virtually no funds under management.

Twenty years on and Quilter Cheviot Investment Management now has some £1.6bn of funds under management in Birmingham and a team of 44 professionals advising private clients, trusts and charities on how best to preserve and grow their wealth.

The company’s growth is such that it has just relocated from its Bennett’s Hill office to the city’s most prestigious commercial address, the Grade A Two Snowhill at the heart of Birmingham’s business district.

Quilter Cheviot’s Birmingham base is the largest regional office of its UK-wide network, which includes offices in Scotland, Ireland and Jersey.

That success, says head of the office Sean Raftery, is down to a blend of professional and technical attributes combined with the strong relationships forged within the wider West Midlands community.

Raftery says: “It seems fitting we should need a new office exactly 20 years after setting up in the city back in 1994, when Sir Norman Fowler opened our first office. Last year alone we recorded double digit percentage growth in the funds we have under management in Birmingham and we had simply outgrown our old HQ”.

The wealth management sector has undergone some radical changes in the 20 years since the Birmingham office opened.

But, says Raftery, the most important aspects of their business remain the same.

“It’s a cliché but ours is fundamentally a people business. What is most important in managing a client portfolio successfully is

WEALTH MANAGEMENT

The Quilter Cheviot Birmingham team at their new offices at Two Snowhill in the city’s central business district.

Investors should remember that the value of investments and the income from them can go down as well as up a proper understanding of that client’s objectives, approach to risk and any ethical or other considerations.

“We have worked hard to retain our investment managers because they are the ones who hold those relationships and have that deep understanding of their clients. When you combine that continuity with our in-depth research and intelligence capabilities you end up with a compelling proposition. That’s why we keep growing.”

Raftery believes that the wealth management sector in the city is thriving and says the industry overall is currently witnessing 5% growth per year.

He added: “Our success is based on the fact that we are specialists in wealth management.

Our regulatory track record, the absence of institutional conflicts of interests and the transparency of our charges all bear positive comparison with some of the larger institutional bodies, such as banks.

“The depth of our relationships in Birmingham, combined with the longevity and continuity of the senior team here, have also played a major part in our success in the city.

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“We’re heavily involved in charitable causes and, as individuals, all want to put something back into our local community.”

Good causes include the Birmingham City Blues’ Give a Gift campaign, Juvenile Diabetes and the Queen Elizabeth Hospital.

For the next 20 years, Raftery believes it’s a case of more of the same. “We are very ambitious and confident about future growth.

“Independent financial advisers know we can be trusted to work alongside them and we’re very proud that many of the first clients we acquired back in the 1990s are still clients today.”

Investors should remember that the value of investments and the income from them can go down as well as up.

Tel: 0121 214 5423 Email: nicola.walker@IrwinMitchell.com www.irwinmitchell.com

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OPINION

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CLIENTS ARE AT THE HEART OF OUR PLANS Ian Halstead talks to Richard Venner, director of financial planning at Charles Stanley’s Birmingham office, where he offers a personal view about the changing nature of wealth management for high net-worth individuals There’s been a sea-change in recent years for people who deal in financial planning, and it’s all for the better for everyone concerned, especially their clients.

Historically, the work was done by discretionary fund managers who would do all they could to ensure the best possible outcomes, but the changing regulatory environment has polarised the sector to the point where you really need specialists in financial planning and specialists in investment management.

I think the critical difference between how private banks operate, and how we operate, is about how you deliver the outcomes and who ‘owns’ the relationship.

We work with a client’s professional advisers, but also act as relationship managers, because the whole wealth management strategy needs to be managed carefully as it evolves.

Our definiiton of a HNWI would be someone who has at least £10 million of investable assets, and at that level, they’re entitled to expect the highest possible standards, not just of investment advice, and of investment management ability, but also of personal service.

I think we can set ourselves apart from the private banks not just in how we deliver the desired outcomes, but in how we develop relationships with our clients, because we understand that each client is different and that we’re prepared to commit time and resources to learning precisely what their requirements might be.

Some organisations have commoditised

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Richard Venner

their approach to wealth management, but for us, client relationships must always be at the heart of the process.

Our discretionary accounts have grown by 100%, which I think suggests that clients appreciate our approach. There is never a substitute for the power of advice, a wealth management strategy can never be just about the products.

Yes, there is some clever marketing in this sector, done by some clever firms, but I always tell prospective clients that they need to look ‘under the lid’, when they are wondering who should be given the responsibility for their wealth

The personal touch will be ever-more important

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management strategy.

As a group, we are always looking to invest in people and expertise which will enhance our abilities to serve clients. In December 2013, for example, we bought John Redwood’s Evercore Pan Asset Capital Management business, which specialises in providing passive investment management services.

I also think we really understand the wealth management sector, and the individuals who work within it, so we can offer thoughts on which advisers might be chosen.

For example, in my opinion, there are probably only about five decent private client lawyers in the Birmingham area who could handle the level of work our clients would require, and the service standards which we would expect. Looking ahead, I expect the trends we have seen in the last year or two to continue. There will be more pressure on IFAs and there will be a huge amount of new platforms coming forward, so it will be interesting to see which survive.

The personal touch will be ever-more important, and the advisers who have servicefocused strategies will continue to do well, particularly those who can be proactive in their decision-making, and who underpin their approach by sound and timely research.

Equally, wealth management advisers must always remember that the clients, and not themselves, are the decision-makers. Times have changed, the appetite for risk has changed, and I don’t think it’s acceptable for anyone to try to shoehorn clients into taking certain products, or into accepting a particular approach. n

WEALTH MANAGEMENT

WINTER 14

COMPANY PROFILE

How recent taxation reforms will impact on pensions and divorce Nicola Walker, Partner and Head of the Birmingham Family Team at Irwin Mitchell explains the changes and offers some possible solutions.

On 29 September 2014, the Chancellor announced reforms to the taxation of benefits paid from money purchase pension schemes on the death of a member from April 2015. These together with other proposals increasing pension flexibility have placed issues of inheritance planning very much in the public eye. Given the increasing number of over 55s divorcing, the treatment of pensions on divorce is an increasingly topical matter.

For those who have planned and provided for their retirement, the prospect of losing pension can cause a great deal of anxiety. However, with careful advice and understanding, a favourable solution can most often be found.

On divorce, the family court has wide discretion when determining how to deal with pensions. Its preferred options tend to be to offset the value of pension against capital (for example, with one party taking a reduced share in the matrimonial property in order to keep their pension) or to “share” the pension.

Since 2000 the court has been able to make pension sharing orders. In its simplest form a pension sharing order involves the court taking a percentage of one party’s pension and transferring it to the other for them to invest in their own name. In that way each party can plan for their own future, without being tied to or reliant upon the other.

In long marriages, the court often uses a pension share to equalise the capital value of a couple’s pension pot or to equalise the income they will each receive in retirement. Whichever approach is taken, apart from in the most straightforward of cases, expert actuarial advice will be needed.

That advice should not only take into account the legalities but should also be practical and based in commercial reality. The assumptions used by the expert will often be crucial. By way of

WEALTH MANAGEMENT

Nicola Walker.

Given the increasing number of over 55s divorcing, the treatment of pensions on divorce is an increasingly topical matter

example, up until very recently actuarial reports have tended to use the assumption that the person receiving the pension share will purchase an annuity. In certain cases that may still be appropriate. However, given recently proposals as to the availability of income drawdown and Inheritance Tax, the assumption may not always stand up. A good legal advisor will not shy away from challenging assumptions where necessary.

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The courts have issued clear guidance that theoretical pension calculations must be seen in a commercial and practical context.

Another issue often raised is how to deal with pension assets that one party has built up prior to the marriage. Second and third marriages are increasingly common and it is not unusual for a couple to come into a relationship with a significant pension pot. Again, the input of expert advice can be crucial. By calculating which part of a pension was accrued during the relationship a fairer outcome can be achieved.

It is often possible for a couple to take mutually beneficial steps when negotiating how best to deal with their pensions. This can work particularly well if they choose to deal with matter outside the court arena (for example by going down the mediated or collaborative routes of divorce). But it can also work in contested cases where the court does become involved.

Once the court has made a decision on how pensions are to be divided there is nothing to stop a couple from taking joint advice on how best to achieve that split, minimising cost and potential tax.

If you have any queries relating to the treatment of pensions on divorce please ring Nicola Walker, Partner and Head of the Birmingham Family Team at Irwin Mitchell on 0121 214 5423.

Tel: 0121 214 5423 Email: nicola.walker@IrwinMitchell.com www.irwinmitchell.com

SPECIAL FEATURE | WINTER 14

COMPANY PROFILE

WINTER 14

Planning on selling your business?

Jackie Hendley and Paul Hamilton of Smith Cooper offer a series of tips to ensure a successful sale.

Selling a business can be a difficult decision. How much money you make as a result will depend on the reason for the sale, the timing of the sale, the strength of the business’s operation and its structure.

Then once the business is sold, you’ll need to determine some smart ways to handle the profit.

In this article we look at some tips to consider when thinking about selling your business. We have concentrated on issues relating to people who don’t plan on working again, though of course, not every business exit leads to the vendor’s retirement.

THINK ABOUT A TIME FRAME Ideally, you should start thinking about selling your business five years ahead. That way you will be able to maximise your profit from the deal and choose the right time for you and the market.

ARE YOU SURE YOU WANT TO SELL? If you don’t sell your business, you may be able to pass it on using Business Property Relief inheritance tax-free.

HOW REPLICABLE IS YOUR BUSINESS? Is your business overly reliant on one individual?

You should start to think about having a management team in place that will prove to a potential buyer that the business is viable without you in it.

WILL YOUR SALE QUALIFY FOR ENTREPRENEUR’S RELIEF? Advance consideration should be given to ensure that full benefit can be taken of potential tax reliefs on a sale, for example: Entrepreneurs relief which, provided certain conditions are met, entitles a seller to benefit from a 10% capital gains tax rate on qualifying disposals up to a lifetime maximum of £10 million of gains.

investments in a partner’s name to maximise the lower rate tax bands.

UNDERSTAND YOUR ATTITUDE TO RISK You should have a general understanding of your attitude to risk that allows your professional adviser to know your capacity for loss and fluctuating gains. You’ve spent time building a business and amassing money – maybe a whole lifetime. You will probably want to be reassured that the people investing your money aren’t taking unnecessary risks.

Paul Hamilton Smith Cooper Indpendent Financial Solutions.

Your wealth can open up new avenues and enable you to secure your family’s future and achieve your life goals MAKE THE MOST OF PENSION CONTRIBUTIONS It’s easy in the run up to a sale to overlook pension contributions. You can carry forward unused allowances from the previous 3 tax years, which including this year’s allowance could mean £190,000 is tax relievable before April 2015, either by you personally or by your business.

THINK HOW YOU WILL EQUALISE YOUR INCOME POST RETIREMENT You should look at your investments and earnings (including any ‘earn out’ from the sale of your business) to make the best use of tax allowances. It can often make sense to put

Smith Cooper Independent Financial Solutions Ltd is authorised and regulated by the Financial Conduct Authority (443209). This information is based on our current understanding of legislation and regulations

SPECIAL FEATURE | WINTER 14

PLAN YOUR INVESTMENT TIME HORIZONS Generally, the older you get, the less you spend.

Most people have plans for when they first retire; travelling, perhaps moving house; socialising.

Most people in their mid 80’s lead much quieter lives and closer to home. You need to think about structuring your capital and income requirements so that you have more available in the early years with it tapering off as you get older and there is less need for spending.

What goes into your ongoing financial plan will depend on how much you sell for, your ongoing commitments, the lifestyle you want to achieve or maintain, and whether or not you plan to retire from business. Whether you are hoping to make another business investment in six months’ time or plan to retire from business entirely and need help to discover how your wealth can open up new avenues and enable you to secure your family’s future and achieve your life goals, Smith Cooper can develop and maintain the right strategy for you.

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For bespoke tax and financial planning please contact Jackie Hendley or Paul Hamilton from Smith Cooper on 0121 236 6789.

WEALTH MANAGEMENT

WINTER 14

COMPANY PROFILE

Life after a business sale: why you need to start planning now Investing time in planning, building a strong network and talking to those who have sold up are key to a happy and fulfilled life after selling a business.

For every entrepreneur who embarks on the journey of building a business of their own, a successful business exit represents a high point in their career.

While this is rightly a cause for celebration, it also represents a step into the unknown.

Although there is plenty written about the growth stories of entrepreneurs who build up new businesses and great fanfare for those who successfully sell up and exit, very little is written about life after they leave their businesses.

So just what do entrepreneurs do when they have sold a business? Is it easy to build a new career? And is life after exit as satisfying as many would imagine? To throw light on this important matter, these are the questions we asked over 180 entrepreneurs for our report “Life After Exit – What Happens Next?”.

What we learned is that although many entrepreneurs find the transition into this new phase in their lives a straightforward one, others find the combination of wealth and long-awaited freedom far harder than they imagined.

Most tellingly of all, both groups find it harder and that it takes substantially longer than they expect to find activities which put their time and wealth into play in a way which keeps them fulfilled. Looking at our research, three important lessons emerge for any entrepreneur contemplating life after a business sale.

The first of these is the importance of planning.

Many argue that in the quest for growth, success and ultimately a business sale, there is little time

to was that once out of their business, the quality of people you know are as important as the time and money you have available. Your network is the place you will find opportunities to advise, invest and get involved with new ventures – the common interests for entrepreneurs who have sold a business. The last lesson is to accept the need to experiment.

The majority of entrepreneurs build up portfolio careers after exit but part of that is understanding that experimentation will not always lead to success or satisfaction. It takes time and patience to find the right opportunities which will work for you and your new lifestyle.

Entrepreneurs may even experience more failure in their new career than when they were running their first business.

There is no doubt that those who see a business exit as the opportunity to exercise choice and freedom are right. But even with money and time on your hands, successfully carving out a new career requires planning and no small amount of hard work.

Miles Plumb.

to think about life after the business is sold. But the experience of those who have sold up is the opposite. Their advice is to plan for exit before you sell so you have the right options open to you when the time comes. This includes financial planning. It will have the biggest bearing on your ability to achieve the lifestyle you want yet many choose to ignore this until after the sale.

The second lesson is to invest in your network.

The unanimous view of entrepreneurs we spoke

What we learned is that although many entrepreneurs find the transition into this new phase in their lives a straightforward one, others find the combination of wealth and long-awaited freedom far harder than they imagined WEALTH MANAGEMENT

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For more information about becoming a Coutts client, contact Miles Plumb, Director for Birmingham on 0121 607 8486 or miles. plumb@coutts.com. Calls may be recorded.

SPECIAL FEATURE | WINTER 14

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