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SJP unveils post-RDR proposition

by Michelle Abrego on Dec 14, 2012 at 11:10

SJP unveils post-RDR proposition

Tied-advice network St James’s Place (SJP) has unveiled its post-retail distribution review (RDR) proposition and adviser charging regime.

The firm will drop a number of products including the SJPI Money Market Bond, stakeholder pensions, Section 32 pensions and a range of offshore open-ended collective investment schemes and the SJP annuity service.

It said these products had not seen high demand from clients or partners and accounted for less than 1% of total new business.

In a note to partners SJP, headed by chief executive David Bellamy (pictured), said adviser charges would be deducted from products.

‘Whilst some advice firms will offer the option for clients to pay advice directly, perhaps by cheque or Direct Debit, we will be facilitating the payment of advice fees by deduction from the product/ investment, as now.

‘If the clients are happy with our advice charges and want to take our advice, then there is nothing else for them to do.’

It said that while today partners receive initial and renewal turnover as remuneration, those will be replaced with initial advice fees (INF) and ongoing advice fees (OAF) and will be funded from the advice charges paid by clients.

A note to partners said: ‘You will be familiar with the fact that the "cost of advice" shown on illustrations today is higher than the 3% INF partners receive due to the Financial Services Authority's commission equivalence rules; and a similar approach will continue post-RDR, although the amounts disclosed reduces slightly.

‘Hence, post-RDR the initial adviser charge disclosed on the services and costs disclosure document and illustration will be at 4.5% (compared to the 5% disclosed today).’

For its third party products, excluding protection, the firm will charge an explicit initial and ongoing charge for advice, facilitated by the product providers on top of their factory gate prices.

60 comments so far. Why not have your say?

Christopher Petrie

Dec 14, 2012 at 11:20

"Tied Advice network"? I preferred "Upmarket Sales force"!

Seriously, SJP do seem to be on a roll right now, let's hope the FSA ensure there is no smoke and mirrors by way of their Vertical Integration process. No problem with this firm as long as there's a level playing field.

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stephen lyth

Dec 14, 2012 at 11:48

A bit like having your teeth taken out, Clients won't feel a thing

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Neil Ryland

Dec 14, 2012 at 11:53

4.5% initial charge - that sounds very reasonable, where do I sign Mr SJP Partner?!?

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Scrapheap2012

Dec 14, 2012 at 12:01

No more SJP annuity service.....

They'd better keep an eye on their KPIs for Drawdown business and retirement deferrals then?

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Hugh Jars

Dec 14, 2012 at 12:03

4.5% Initial charge?.....

sounds ok, on amounts up to say 20k.... £900 should more than cover the cost of the work in a reasonable and fair way ....

On £100k lump sum..... £4,500 nice when you can get it.....Still reasonable?

I would say debatable,--particularly on a tied-restricted advice proposition....no more work involved than the £20k investment...

Although, on 2nd thoughts, the client is getting an up market Suitability report and all correspondence, on high quality gold and blue top -end stationery,

£200k lump sums, ?? Which you would expect as the norm, from an 'Upmarket Sales Force' with Professional connections in the City

£9,000 ?

Good if you can get it,

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Dante

Dec 14, 2012 at 12:04

Somebody explain;

I assume there is no advice fee beyond the initial 4.5% and that SJPs revenue sits within the TER of the funds, not mentioned above.

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Tony Clarkin

Dec 14, 2012 at 12:07

Does that mean that clients wll be able to switch off on going advice fees?

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Marc (SE)

Dec 14, 2012 at 12:12

So in conclusion, SJP continue as they always have - handsomely rewarded for their work at the expense of their clients. Clients who don't have a prayer of understanding if they are being treated equitably or not, and prbably don't realise that SJP are simply a tied sales force.

No RDR issues for SJP - Fair play, and well done to the FSA!

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Susan Hill

Dec 14, 2012 at 12:13

SJP is a product provider with a sales force; they are not partners in the legal sense but self-employed advisers. The FSA guidance states ‘product providers will be banned from offering commission to advisers and will also face other requirements if they offer to deduct adviser charges from their products’. From what I have read in this article it seems SJP as a product provider is doing just that, deducting charges from the product the paying the adviser out of the product. Replacing the terminology ‘commission’ with ‘advice fees’ and not offering the client different ways of paying seems SJP are ‘business as usual’. I hope they carry on taking this stance because it will make it easy for me to take business off them.

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Gibbon

Dec 14, 2012 at 12:14

If you read this in detail the Partner doesn't get 4.5%, it is this figure because of the commission equivalence rules.... the client doesn't get charged this in full.....

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Rob.

Dec 14, 2012 at 12:15

what is the ongoing advice fee then?

Answer on a postcard to "Dick Turpin Tombola competition"

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Scott Gallacher

Dec 14, 2012 at 12:17

Out of curiousity what is the level of SJP's ongoing advice fee (OAF)?

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IFA1

Dec 14, 2012 at 12:28

Have to say, thank goodness for St James Place, otherwise who else would we pick on.........

a merry christmas to one and all

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Rob.

Dec 14, 2012 at 12:33

well they do send clients a birthday card........that comes at a cost.

They really should have thought of a better acronym than OAF to describe a SJP Partner's charging structure.....................The possibilities of that one are endless in terms of comedy.

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Abdul via mobile

Dec 14, 2012 at 12:34

100% allocation.nil bid/offer.6 years exit enalties. 2.3% ter. That's clever,on the face of it.adviser gets 3+o.5

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Damien Clyburn

Dec 14, 2012 at 12:41

'Hence, post-RDR the initial adviser charge disclosed on the services and costs disclosure document and illustration will be at 4.5% (compared to the 5% disclosed today).’

How often do SJP disclose this to their clients anyway? From what I have seen recently, they try and avoid providing the std disclosure documents out of fear of the client seeing how much they get.

I could not look a client in the eye and tell them I am receiving large sums of money for selling them a SJP Investment Bond, invested in a nice SJP fund, wrapped up in side a Loan trust.

SJP seem to get a bite of the cherry all over the place and somehow continue to get away with it.

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Jonathan Kirby

Dec 14, 2012 at 12:54

Memo to Ratty Meanwhile (Martin Wheatley) FSA/FCA

How about having some sort of review to ensure that the cost of providing the advice is proportionate to the amount being taken in charges?

You could call it something catchy like the Review of Retail Distribution.

Cost should be quite reasonable - say £3.5 billion over 10 years?

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Julian Stevens

Dec 14, 2012 at 12:55

"Whilst some advice firms will offer the option for clients to pay [for] advice directly, perhaps by cheque or Direct Debit, we will be facilitating the payment of advice fees by deduction from the product/ investment, as now."

Alternatively, read:-

"Whilst true advice firms are likely to offer the option for clients to pay for advice separately from what they invest into the product, SJP will not be facilitating any such options. Instead, we will maintain a system that accords as closely as possible with our present business model, namely the sale of SJP products wherever possible, with the salesman's cut deducted from the sum invested. Basically, all we'll be doing is rebadging commission as an adviser charge bexcause the FSA has said we have to.

As for all and any products that pose a less attractive work:remuneration ratio ~ we'll just ditch them altogether, because all we really want is for our partners to shovel as much money as possible into our own funds."

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Dante

Dec 14, 2012 at 13:01

@IFA1...Not picking on SJP at all.

They have had a lot of time, plenty of resource and some bright people to think it through.

These blogs are festooned with vitriolic comments regarding SJPs TER.

A sector of IFA community has been looking forward to transparent separation of advice and product/funds.

So what’s the answer?

Do SJP have a 4.5% Initial fee and then an on-going advice fee. If so at what level?

Can a client switch this OAF off?

Are they walking onto a spike with the FCA.( I doubt it)

What are the true TERs within their mirrored funds? 200bps++?..or ?

Middle- England- mass- affluent has long been told “don’t worry about charges, we achieve upper quartile results” and of course “look at the scale and the ability to redress”

The informed consumer decides… The key word is informed.

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Abdul via mobile

Dec 14, 2012 at 13:03

I'm no advocate for SJP,but any less than 3+0.5 is likely to end in tears,given the liabilities and costs involved. Methinks we dost protesteth too much.

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Susan Hill

Dec 14, 2012 at 13:08

Julian, sorry to correct you, which I do only for the opportunity to make a comment, but SJP partner is simply a marketing term, it has no legal substance. SJP (marketing term) partners are self-employed financial advisers, Like 'up market' let us drop the SJP charade of using expressions that make them sound posh.

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Glint Thrust via mobile

Dec 14, 2012 at 13:09

I'm told that ongoing charge can be turned off,but would anyone want the kind of client who would do that. They are the clients who will complain about something,sooner or later.

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Keith Cobby

Dec 14, 2012 at 13:10

Adviser charging = commission. Good luck to SJP if the FSA lets them get away with it.

If their clients don't like it they can walk.

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Rob.

Dec 14, 2012 at 13:13

It's called "Cartier Mist" Susan

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David Curley Dip extrodinaire

Dec 14, 2012 at 13:19

Has anyone picked up on Michelle's change of description, Not anymore are SJP to be known as "Upmarket sales force" finally she has accepted that they are just a "Tied Advice Network" and have never been upmarket about anything.

Could it be that she has seen the light ?

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Susan Hill

Dec 14, 2012 at 13:23

As most investments products have a 6 year early encashment penalty, clients can't simply walk. The EEP allows SJP to ammortise the up front fees paid out of the product to the adviser. How exactly does this conform to the new adviser charging rules?

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SIMON WELCH

Dec 14, 2012 at 13:25

I have just picked up a new client - their IFA has just joined SJP.

Having recommended many products over the past few years he wanted them to cash them all in and then reinvest it all with SJP.

Is it a coincidence that he has never taken any trail commission, only initial, and that he plans to retire in 2 years??

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Philip Wise

Dec 14, 2012 at 13:27

If they arent allowing the client to pay by cheque, then their discounted gift scheme, loan trust, and, pretty much, any IHT mitigation scheme they offer will be worse value than what is on offer from an IFA (as the fee for the advice disappears out of the estate immediately, whereas if the money goes into an investment, then deducted as an adviser fee, and takes 7 years to be IHT free; also clients wont be able to put as much money, net of charges, into a discretionary trust, without an immediate tax charge).

Also, SJP's clients wont be able to take as much money out of their beloved bonds as clients of IFAs, due to their refusal to let clients pay by cheque and standing order.

Clearly, they wont be able to offer a full range of products to accountants and solicitors - you obviously cant give pension advice if you dont offer s32s or annuities! So, just as the door for referrals opens, it shuts back in their faces. Still, they've got a couple of weeks to get referrals! Happy Christmas!

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Jonathan Kirby

Dec 14, 2012 at 13:32

@ David Curley

There was a Citywire article a few weeks ago asking for peoples thoughts on the title and the overwhelming reaction was ditch the upmarket farce.

PS Think a better anagram for Martin Wheatley is Mean while Ratty!

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David Curley Dip extrodinaire

Dec 14, 2012 at 13:48

Hi Johnathan,

Don't think I saw that, Democracy in action

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Julian Stevens

Dec 14, 2012 at 13:49

To Simon Welch ~ A former IFA here in Bristol did exactly the same upon joining SJP. Churned everything he'd ever sold whilst an IFA sold and even ripped out 3% initial commission for so doing. He couldn't even comprehend my disapproval of such activities or, if he did, he wasn't prepared to admit it.

But hey ~ according to David Bellamy, such practices are perfectly okay with the FSA. One wonders, though, if the regulator would be quite so sanguine about an IFA doing the same sort of thing. Kinda fishy, isn't it?

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Lesby Racquethandle via mobile

Dec 14, 2012 at 13:49

PW

1/SJP are now whole of market for annuities,so they no longer need a bureau.

2/When was the last time anyone did a S32? And was it good advice?

If we spent less time bitching about SJP and more time doing business,they wouldn't be about to wipe the floor with us!!

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l'ifa passeport en provenance de France

Dec 14, 2012 at 13:54

its not client agreed ? so it must be commision

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Abdul via mobile

Dec 14, 2012 at 13:58

L'Ifa,

Lets not be naive now

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Philip Wise

Dec 14, 2012 at 14:00

I did a s32 a couple of weeks ago. Hoping it was good advice! 100% tax free cash for the client!

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Scott Gallacher

Dec 14, 2012 at 14:09

No doubt SJP will simply refer those clients needing a S32 to an IFA?

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Lesby Racquethandle via mobile

Dec 14, 2012 at 14:14

I know a local ifa who receives referrals from Sjp partners.

Is that a problem?

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Naive? via mobile

Dec 14, 2012 at 14:24

Am I being naive - why wouldn't you give the client a choice of paying by cheque?

As for the anagram I quite like 'Laymen hear twit'!

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l'ifa passeport en provenance de France

Dec 14, 2012 at 14:43

Graeme Laws

no longstop thou !

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Knowledgable insider

Dec 14, 2012 at 14:54

SJP have been successful because they have been able to interpret the nonsense that the FSA rules are, and will continue to be, in a manner that rmunerates their advisers sufficiently and dosnt confuse the client. Unlike the rubbish that the FSA expect us to present to the client that is designed to confuse the client and paint us all as dodgy characters.

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madmitch

Dec 14, 2012 at 14:54

May be RDR isnt the Monster we all thought it was.

Seems pretty sraight forward to SJP, maybe we shouls all be following their model.

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Hugh Jars

Dec 14, 2012 at 15:13

I find it both suprising and disgusting, in equal proportion, that the Heirarchy at SJP could still develop /promote/arrange/endorse financial products that have a 6 yr tie in with early encashment penalties..... It's taking products back 10 - 15 yrs FFS

Having said that, it raises more questions about the actual mentality of their clients, if they are so naive as to not bother to take a peek through the ''Cartier Mist'' - (great analogy Rob. by the way ) at charges.

Or, perhaps, they are the type of clients who avoid asking too many questions, in case they are made to look stupid for asking stupid questions ?......

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Scrapheap2012

Dec 14, 2012 at 15:18

Hoorar for SJP!!

I believe 10% of my new clients this year are dis-affected clients of theirs, sold the world upfront, assets hoovered up and then hardly hear of the partner gain apart from perhaps asking about them buying something else, increasing contributions etc.

A flaw it seems to me is they make such an emphasis on cracking the whip on the fund managers they use to deliver superior returns (not guaranteed) that the SJP partners seem to think no ongoing service is needed from them due to the 'active management'.

Doesn't really sit then with an ongoing advice charge!

Bottom line, viva SJP and their 'new' remuneration strategy....

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Scrapheap2012

Dec 14, 2012 at 15:23

HJ, it always amazes me in their suitability report that no numerical comparison of RIY or projected pot sizes (O&M etc) is required between existing pensions elsewhere (being hoovered) and the actual SJP PP recommended.

Usually seem to be just a sentence saying the costs are higher but the client doesn't mind this.

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Harvey Wickham

Dec 14, 2012 at 15:38

4.5!!! My business (Melior Wealth) only charges 0.5% up front. The future of financial advice!

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Glint Thrust via mobile

Dec 14, 2012 at 15:39

Surely,anyone who wishes to invest short term(less than 5/6 years)should be in cash?!

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Hugh Jars

Dec 14, 2012 at 15:40

@Scrapheap,

Yep.... that fits with clients (who amazingly are professionals or people with their own businesses) not wishing to ask too many questions.....

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Hugh Jars

Dec 14, 2012 at 15:49

@Glint Thrust, you are missing the point,- (if retorting to my comment)

We aren't talking about suitability of Asset Allocation here.... It's the 2 finger gesture SJP are making to the rest of the industry, - who have moved on from punitive contracts, through basic TCF principles, and now in readiness for RDR, have offered CLEAN contracts for 10 yrs, Bond/ Collective whatever, that don't imprison a client , irrespective of Asset allocation,, simply to feed the Commission (Forget Adviser charging bullshit ) of the SJP 'partner'

If the FSA let them get away with this, we might as well all shove our heads up our RDR'ses and see if there's any light on....

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Cliff Northwood

Dec 14, 2012 at 16:10

One think not made clear in the article is who sets the charge? My understanding of customer agreed remuneration is that it is agreed between the adviser and the client – the provider should be incidental to this other than to facilitate whatever is agreed. So if the adviser (unlikely I know) were to agree an initial fee of 0% how would SJP earn? Is there an additional product charge on top of the 4.5%? If SJP is setting the fee and it cannot be negotiated then it is a commission.

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madmitch

Dec 14, 2012 at 16:30

Every business sets their tariff of fees and charges, it doesnt have to be negotiable.

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JM Keynes

Dec 14, 2012 at 17:04

Get real - the SJP formula is the future - the networks are doomed after RDR. You will see more Honisters next year.

I am an IFA in a network, but the writing is on the wall for us.

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Glint Thrust via mobile

Dec 14, 2012 at 17:04

My point is that anyone charging 0.5+0.5 ,as a good friend of mine is,will simply not be in business for long

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sol trader

Dec 14, 2012 at 17:20

I assume SJP will be doing regular contribution ISAs or Pensions (??) post rdr.

It appears to me reading COBS 6.1A.22 R that you can't take an initial fee on each contribution if you are also providing (and charging for) ongoing advice. Am I missing something?

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Philip Dodd

Dec 14, 2012 at 17:33

If it`s an INF, consistency suggests there should be an ONF......unless there is some significance in OAF.

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Cliff Northwood

Dec 14, 2012 at 17:40

madmitch - if a product provider is setting an "advisory fee" and deducting it directly from a plan without any other option then it sure looks like it passes the quacking duck test to me.

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Ian Lees

Dec 14, 2012 at 19:47

So all the phaffing about by those ever so clever clods at the FSA - under the mis management of MP's and the MP's fiddles - the enormous costs imposed on insurance companies and advisers - and SJP have come up with a great way of displaying theri costs to the clients in the same way - but in different style. What a bleedin' waste of time for everyone. What an exceeding waste of money - except those MPs who are paid for this - and their pension funds - and the merry go round for FSA executives rumbles on. Get a job at the FSA - then be purchased by a bank or insurance company - to show how to avoid " regulation ", and the tax payer / policyholder pays through the nose or through their insurance policy ? R D R ( Return of dual- pricing retailer )

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Chris via mobile

Dec 14, 2012 at 20:04

I'm aged 33 and I really can't wait for all you miserable old negative advisers to retire so I can further increase my client bank with people who love good service from a positive adviser who charges a nice healthy transparent fee.

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Ian Lees

Dec 15, 2012 at 09:15

Chris . . .you might have missed . . . . it is many of those you currently claim " who love good service ", who are moaning about the high charges, the high cost from SJP etc.. Secondly those miserable negative advisers ", came up through the regime you are entering, learnt their craft, earned their knowledge - which I hope you to will learn - and be half as committed to their clients as they are - then, and only then will you be in a position of knowledge - to insult your credible and incredible peers ! The great news is as you say you will be able to pick and choose your client - from a base of customers who cannot obtain or afford advice - those remaining will need to go to the banks like the Treacherous Savings Bank ( TSB - owner of Lloyds, Scottish Widows and Clerical Medical - and a significant shareholder of SJP ). So your " services", will assist the TSB ( terminating savings banks ) - to take their business direct e.g Scottish Widows Direct - and their current attack of accountants for the Auto Enrolment business. Assisting the Gov't - to force people into poor annuities . I would put money on SJP - not advising on AE - the reason - they have no interest in provide a full or comprehensive service - only the woolworth sales approach - pick and mix ?

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Tax Breaks

Dec 16, 2012 at 08:59

Phillip Wise commented - If they arent allowing the client to pay by cheque, then their discounted gift scheme, loan trust, and, pretty much, any IHT mitigation scheme they offer will be worse value than what is on offer from an IFA (as the fee for the advice disappears out of the estate immediately, whereas if the money goes into an investment, then deducted as an adviser fee, and takes 7 years to be IHT free; also clients wont be able to put as much money, net of charges, into a discretionary trust, without an immediate tax charge).

Have to be a little careful on IHT and fees - if Settlor pays fee on a certain Trusts could be seen as an addition to the Trust and could be subjected to an immediate charge to IHT - in addition dependent on the advice/action could be subject to VAT.

RDR is such fun!

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Ian Lees

Dec 17, 2012 at 10:07

Is this what they meant when they said . . . . they had no idea about the " unintended consequences ". . .of RDR or intervention on subject matters they know nothing about. MP's must have got their information from the internet . It is so similar when Phoney Blair went to war . . . casuing death and destruction at home and abroad .. . the result of no one in the cabinett who had any military experience . . . . had any knowledge of the effects of war . . . . or the " unintended consequences ". Next" . . . . Quantitive Easing ", first tried out in Edinburgh in the times of Sir Walter Scott . . . . and his purchaseof life assurance from Scottish Widows . . . and bankruptcy . . . before highlighting the troubles with the tart ta tan . . . en special relationship avec France . . .en le introduction of shortbread into civilised society in Edinburgh - before the troubled Edinburgh Banks like TSB ( now having purchased Lloyds and Bank of Scotland and Halifax and Scottish Widows and Clerical Medical and Hill Samuel and TSB Life and St Andrews Life and . . . and the Robbing Bank of Scotland. It is interesting how banks borrowed money form the tax payer - are now hiking interest rates and to borrowers of the reckless lending policies of banks and building societies - under scrutiny of Bank of England FSA and the Governemtn MP's - still fiddling their expenses . Corrobaoration or just Corruption at the highest levels ?

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