Get cheap life insurance at the checkout rather than getting advice from an IFA- why not? Cut out the middleman, reduce commission, they are basic products aren’t they?
Well no, they are not. They are simple in execution, but when you really need them, then you understand the advantages of setting them up correctly.
If you take out a life policy on yourself, an own life policy- the way most people do- then the policy goes into your estate on death. What that means is that it gets dealt with as your estate, if you have a will your loved ones may have to wait for probate to be granted. If you don’t have a will then the problems can really start. Don’t forget your will can be challenged to, so if your family circumstances have step children or other interesting complexities, then think carefully.
Then the other big issue- if you take out a policy to protect your children while they are still dependent and you and your partner die, the kids can’t get the money directly and you haven’t specified how and where the money goes. Will you leave it to a court?
A bit of simple planning makes such good sense. If you are insuring a partner, then get them to take out the policy on you and vice versa. This way, if you die during the policy life they get the payout straight away.
Anything more complex, consider a trust. Insurance companies will give you a trust to go round your policy free, although you might want to take legal advice and tailor it for your own needs. Your IFA will guide you as to the right trust.
If you set up a trust, you will appoint trustees and they will get the policy proceeds, your trust will have laid out what you want to happen. As a for example, in the circumatances we gave earlier- your children could be left an income until they are 21 or 25 (or any other age) with grants of capital for buying a house or education up until then and then the full payout of the balance.
Choose an independent trustee with care- you could choose a professional, like a lawyer or a family friend who knows how you think, but generally choose someone of your own age or younger so that they are likely to be there if needed.
You can see the problems with commoditising this product- there is so much under the surface. And make a will!
Wednesday, November 28, 2007
Monday, November 26, 2007
Google Alerts for Investors
If you are interested in the news that makes the market and like me know that sentiment often drives the news, then the new beta service from google can be useful to track a number of things that may be happening in your portfolio.
Google will aggregate information in the news and on blogs and send you an e-mail on a regular basis selected by you. Designed for people to keep up to date on their competitors or their teenage friends from school (that's not me in case you ask, but yes I do have a facebook entry!)
Highly useful if you are trying to stay up with the news and don't use an RSS filter- this way you can get the info sent straight to your mobile e-mail.
Google will aggregate information in the news and on blogs and send you an e-mail on a regular basis selected by you. Designed for people to keep up to date on their competitors or their teenage friends from school (that's not me in case you ask, but yes I do have a facebook entry!)
Highly useful if you are trying to stay up with the news and don't use an RSS filter- this way you can get the info sent straight to your mobile e-mail.
Friday, November 23, 2007
Directors' Duties - The Companies Act 2006
The new directors duties as set out in the companies act 2006 are starting to get everyone's interest. A recent solicitor's briefing tells us that the fact that directors' duties are now set out in black and white and are available to everyone is likely to result in directors being placed under greater scrutiny than is currently the case.
Just so that you remember, on 1 October 2007, new duties were spelled out for directors and further rules come into force in October 2009- this changed from 2008 this week.
By the way, to my friends who run FSA companies, your duties under the companies act are magnified by your parallel duties under the principle based regulation, and if you cannot demonstrate audit of your management processes, you haven't done them.
Isn't it time to carry out an audit of your directors' duties?
1. Check you understand your new duties. Ignorance is no defence.
2. record your compliance and all your material decisions
3. Check your service agreements and your policies for HR and compliance
4. Check your directors insurance complies with the new act- check you understand what it covers you for.
Maybe a good time to review your overall insurance, keyman, shareholder protection, ill health benefits too.
Just so that you remember, on 1 October 2007, new duties were spelled out for directors and further rules come into force in October 2009- this changed from 2008 this week.
By the way, to my friends who run FSA companies, your duties under the companies act are magnified by your parallel duties under the principle based regulation, and if you cannot demonstrate audit of your management processes, you haven't done them.
Isn't it time to carry out an audit of your directors' duties?
1. Check you understand your new duties. Ignorance is no defence.
2. record your compliance and all your material decisions
3. Check your service agreements and your policies for HR and compliance
4. Check your directors insurance complies with the new act- check you understand what it covers you for.
Maybe a good time to review your overall insurance, keyman, shareholder protection, ill health benefits too.
Thursday, November 22, 2007
SIPP Property and Divorce
There has been an excellent arrangement for business owners to buy their commercial property through their pension scheme- but there are dangers too.
The advantages have been well rehearsed before:
1. Tax relief on your pension payments which can then be used to fund the purchase
2. You get tax relief on the rent payments but the pension scheme doesn't pay tax on the rental received
3. You can borrow inside the pension (albeit not as much as you used to- only 50% of the fund now, but nothing stops you borrowing and putting the contribution in)
Some new advantages since last April
1. So called "connected persons" rules disappeared, this stopped you buying from your own partnership or from yourself or family members. This rule stopped many professional firms which owned their practices buying them back
2. New rules allow much bigger contributions, so even though the funding with borrowing rules are cut, you can make bigger pension payments in
But I want to focus on some problems today
1. Imaging buying your firms property, and then a partner divorces. The ex-wife will either have a say in the arrangement or have to be funded out by debt if possible or more contribution s. You need to have an honest conversation with the parties prior to entering into this arrangement if there is a possibility of this.
2. Syndicate arrangements. Often business people fall out and no surprise, they get entered into a heated debate about business assets. Unless you have a syndicate agreement (a kind of pre-nup for SIPPs) then you could get into real trouble. A syndicate agreement sets out what happens in lots of circumstances and how it will be arbitrated.
4. Remember that you can insure things too, both the buildings and the members. Maybe even the key people in the business if it will have a direct impact on the covenant of the pension scheme.
As all financial products SIPPs are great in their place, but consider all the aspects round about them
The advantages have been well rehearsed before:
1. Tax relief on your pension payments which can then be used to fund the purchase
2. You get tax relief on the rent payments but the pension scheme doesn't pay tax on the rental received
3. You can borrow inside the pension (albeit not as much as you used to- only 50% of the fund now, but nothing stops you borrowing and putting the contribution in)
Some new advantages since last April
1. So called "connected persons" rules disappeared, this stopped you buying from your own partnership or from yourself or family members. This rule stopped many professional firms which owned their practices buying them back
2. New rules allow much bigger contributions, so even though the funding with borrowing rules are cut, you can make bigger pension payments in
But I want to focus on some problems today
1. Imaging buying your firms property, and then a partner divorces. The ex-wife will either have a say in the arrangement or have to be funded out by debt if possible or more contribution s. You need to have an honest conversation with the parties prior to entering into this arrangement if there is a possibility of this.
2. Syndicate arrangements. Often business people fall out and no surprise, they get entered into a heated debate about business assets. Unless you have a syndicate agreement (a kind of pre-nup for SIPPs) then you could get into real trouble. A syndicate agreement sets out what happens in lots of circumstances and how it will be arbitrated.
4. Remember that you can insure things too, both the buildings and the members. Maybe even the key people in the business if it will have a direct impact on the covenant of the pension scheme.
As all financial products SIPPs are great in their place, but consider all the aspects round about them
Thursday, November 15, 2007
World Wide Wills
A client brought to my attention the issue of wills when you hold property or assets in other jurisdictions.
Clients who have a home in Spain are often advised to make a will there, but it can cause problems. The last executed will can end up the legally valid one, so the executors can be left with issues to deal with- granted many times the lawyers get the sense of what is happening and make things make sense, but it is fairly obvious that there may be a case where they don't.
An innovation is the world wide will, offered by a number of trust companies and lawyers is a mechanism to ensure that your will is executed in a way that covers all your property.
Worth thinking about
P.S. Remember that Spain does not recognise trusts, so arrangements like UK trust planning don't exist there. There are a number of ways to effect the same advantage.
One way to do so is to create a debt or mortgage on the Spanish property and put the money in a jurisdiction where you can use trust planning for your familly, and that has other income and capital gains tax advantages.
The key issue is to give careful consideration to your assets, how they are held, and what you want to happen to them, then talk to soemone competent to tell you how the tax interactions work. Then review the arrangement regularly. Otherwise you are asking for trouble.
Clients who have a home in Spain are often advised to make a will there, but it can cause problems. The last executed will can end up the legally valid one, so the executors can be left with issues to deal with- granted many times the lawyers get the sense of what is happening and make things make sense, but it is fairly obvious that there may be a case where they don't.
An innovation is the world wide will, offered by a number of trust companies and lawyers is a mechanism to ensure that your will is executed in a way that covers all your property.
Worth thinking about
P.S. Remember that Spain does not recognise trusts, so arrangements like UK trust planning don't exist there. There are a number of ways to effect the same advantage.
One way to do so is to create a debt or mortgage on the Spanish property and put the money in a jurisdiction where you can use trust planning for your familly, and that has other income and capital gains tax advantages.
The key issue is to give careful consideration to your assets, how they are held, and what you want to happen to them, then talk to soemone competent to tell you how the tax interactions work. Then review the arrangement regularly. Otherwise you are asking for trouble.
Wednesday, November 14, 2007
Selling your IFA business- practical steps
According to the plimsoll analysis of the IFA sector I received today, "Times have never been better in the IFA sector with many companies making exceptional profits"
While that is no doubt true, there is a definite growing IFA underclass, unable to keep up or even fully understand the regulator, principle based regulation, where the RDR is going to take them. They know they will have to get out of the business sooner rather than later- so they need to think about how to get the best value for what they have.
What practical steps can owners of small IFA firms take to improve the value of their business?
1. Data
If you want to sell your business for the highest value, your new owner needs to know where the client information is, that it is complete, full and in a system that he can integrate into his own. So check this, now.
You don't need a fancy database- and if you do buy one, check that it can export to Excel type arrangements so that your acquirer doesn't have to go to lengths to integrate it.
You don't have to have the full fact find details in there either, just basic contacts details, phone numbers, e-mail addresses. You can use the insurance company uni-pass system to get the latest data from providers. Tell your acquirer you have audited your data against the insurance company records. It is worth money to you.
2. Clean Compliance
One of the things that I see regularly when carrying out due diligence on small firms is that you think that things have been done, but there is no evidence or audit trails. Look at your compliance records, especially areas where you know that an acquiror will focus, because the regulator has said they are looking at- and build an audit trail- evidence that you have ticked this box.
TCF- record a minute of your staff meetings and put this on the agenda- every time, draw up a checklist of the things you have considered: change your Terms of Business to incorporate
Anti-Money Laundering- have you got a record, is it considered every year, refreshers etc
3. Funds under Advice/ Management
Smart acquirers are looking to build funds- that's where the big multiples are for them. So get into the mind set of how your acquirer exits. He wants to value his whole book on the total funds. The more you give him what he wants, the more value you can achieve.
So this goes back to data- show your clients assets, not just the ones you control, but the ones on the fact find that you don't. Show the client's cash deposits too.
If you show what you have, how much trail income you have built, but also how much more could come from your client bank, you make it easy to get the best value.
I'll talk about other aspects of getting best value soon.
While that is no doubt true, there is a definite growing IFA underclass, unable to keep up or even fully understand the regulator, principle based regulation, where the RDR is going to take them. They know they will have to get out of the business sooner rather than later- so they need to think about how to get the best value for what they have.
What practical steps can owners of small IFA firms take to improve the value of their business?
1. Data
If you want to sell your business for the highest value, your new owner needs to know where the client information is, that it is complete, full and in a system that he can integrate into his own. So check this, now.
You don't need a fancy database- and if you do buy one, check that it can export to Excel type arrangements so that your acquirer doesn't have to go to lengths to integrate it.
You don't have to have the full fact find details in there either, just basic contacts details, phone numbers, e-mail addresses. You can use the insurance company uni-pass system to get the latest data from providers. Tell your acquirer you have audited your data against the insurance company records. It is worth money to you.
2. Clean Compliance
One of the things that I see regularly when carrying out due diligence on small firms is that you think that things have been done, but there is no evidence or audit trails. Look at your compliance records, especially areas where you know that an acquiror will focus, because the regulator has said they are looking at- and build an audit trail- evidence that you have ticked this box.
TCF- record a minute of your staff meetings and put this on the agenda- every time, draw up a checklist of the things you have considered: change your Terms of Business to incorporate
Anti-Money Laundering- have you got a record, is it considered every year, refreshers etc
3. Funds under Advice/ Management
Smart acquirers are looking to build funds- that's where the big multiples are for them. So get into the mind set of how your acquirer exits. He wants to value his whole book on the total funds. The more you give him what he wants, the more value you can achieve.
So this goes back to data- show your clients assets, not just the ones you control, but the ones on the fact find that you don't. Show the client's cash deposits too.
If you show what you have, how much trail income you have built, but also how much more could come from your client bank, you make it easy to get the best value.
I'll talk about other aspects of getting best value soon.
Pre Budget Report and Insurance Companies
The pre budget report was a shocker no doubt! The new CGT rules with 18% taxation has received a huge amount of interest and critisism, but the reaction from insurance companies has been particularly strange.
There has been wide ranging criticism of IFA's who make a living from selling insurance company bonds. Is it because they have mythical tax status, additional allocation or is it because they pay advisers up to 7% commission, but the real issue is the insurance companies who push them so hard.
Now along comes the new chancellor and makes collective investments appear much more sensible, with a lower overall tax charge for many people and the ability to use your CGT allowance each year. What do the insurance companies do?
Well, I had one unnamed company in yesterday telling me how good bonds still are. Why I asked? Because you can get a higher allocation and the client doesn't pay up front, he replied.
What about the tax charges, I asked. Ok, maybe offshore bonds then, he said.
Clients and advisers should take care. Insurance bonds may have a limited use unless the insurance companies get the chancellor to make an early U-turn.
There has been wide ranging criticism of IFA's who make a living from selling insurance company bonds. Is it because they have mythical tax status, additional allocation or is it because they pay advisers up to 7% commission, but the real issue is the insurance companies who push them so hard.
Now along comes the new chancellor and makes collective investments appear much more sensible, with a lower overall tax charge for many people and the ability to use your CGT allowance each year. What do the insurance companies do?
Well, I had one unnamed company in yesterday telling me how good bonds still are. Why I asked? Because you can get a higher allocation and the client doesn't pay up front, he replied.
What about the tax charges, I asked. Ok, maybe offshore bonds then, he said.
Clients and advisers should take care. Insurance bonds may have a limited use unless the insurance companies get the chancellor to make an early U-turn.
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