Why now’s the time to grow your estate planning business

Edited December 11, 2017

For professional advisers. Not to be relied upon by retail investors.

When it comes to personal finance, a dramatic shift has been taking place in the last few years. The amount of wealth being passed down the generations is increasing, and this trend looks set to continue. According to research from Inheritance Economy, in the next 30 years, more than £5.5 trillion will be handed down to different generations in the UK alone.

Families are bearing the brunt of inheritance tax

But as more wealth is being passed down, more families have been left with large inheritance tax bills. According to HMRC, annual inheritance tax receipts topped £5 billion for the first time earlier this year, and the number of estates facing an inheritance tax bill has increased to well over 40,000 since 2010. Receipts are expected to top £6.2 billion in 2022.

The perfect inheritance tax storm?

The need for good inheritance tax and estate planning advice has never been greater:

  • Clients are getting older. And a lot of baby boomers have wealth tied up in property that’s likely to have risen significantly in value since they bought it. These clients are reaching old age and many could have an inheritance tax liability they still need to plan for.
  • The nil-rate band has remained fixed at £325,000 since 2009 and has not risen in line with house prices.
  • Older clients also have investment bonds and stocks and shares portfolios which could have increased in value and tipped them into an inheritance tax liability.
  • Complex changes in legislation and a lack of understanding of the residence nil-rate band have created an opportunity for advice and clarification.
  • There is a wider range of estate planning solutions now available. Gifting, settling assets into trust and life insurance are well established, and Business Property Relief has become increasingly popular.
  • There is an increased awareness of people in the public eye being left with big inheritance tax liabilities. And clients don’t want to make the same mistakes.

A growing number of clients are at risk of leaving behind a tax bill alongside their family’s inheritance. That means there’s an opportunity for advisers to help clients pass more of their wealth to the next generation.

So why aren’t more plans for inheritance tax being put in place?

Recent research by Cicero shows that the main barriers to estate planning are a lack of client urgency and understanding:

  • Clients generally have more immediate concerns that require action, for example retirement income planning.
  • There is a lack of client understanding of the rules and regulations around inheritance tax – some clients do not realise that they have sufficient assets to fall into the IHT trap.
  • In addition, clients are reluctant to pull the trigger. This is mainly down to the need to retain access to capital for other purposes, though the complexity of estate planning products and worries about being seen as a tax avoider are also factors here.

And just because the opportunity is there, it doesn’t mean that estate planning conversations are easy or effective. You may well question the chances of inheritance tax conversations converting into business, and wonder if the investment of time and energy discussing, planning and executing is worth it.

Worthwhile for your client, and for you

You can add real value to clients in this area. This isn’t something where they can indulge in a spot of ‘do it yourself’.

And estate planning could become a valuable part of your business. A significant proportion of your clients should be considering inheritance tax planning (research suggests up to 60% – and this is under the assumption that all clients are married, so the actual figure could be even higher).

By helping your clients with estate planning, and helping them to pass more of their wealth down to the next generation, this also gives you the opportunity to build a rewarding relationship with their children and grandchildren. There is more chance that they will continue to hold the investments they inherit, and they could turn into clients themselves.

Of course, it’s important that clients are comfortable with the risks involved in investing in an estate planning solution. Estate planning solutions place capital at risk, and investors could get back less than they originally invested. Tax treatment depends on individual circumstances and may change in the future. Tax reliefs associated with Business Property Relief investments depend on the portfolio companies maintaining their qualifying status.

In a world where advisers are increasingly expected to demonstrate value and justify their fee, inheritance tax planning offers an opportunity to do exactly that. Conditions are ripe and you probably have many existing clients who would benefit from a discussion on the topic.

How can we help you initiate and direct your estate planning conversations?

Clients often don’t see the value in estate planning. It’s not going to affect them tomorrow so it’s something they would rather delay. We understand these challenges, so to help you break down some of the barriers, we invite you to visit our estate planning hub. It contains a range of information to help you to identify the type of clients you could be having estate planning conversations with.

Research source: IHT & Estate Planning Report, June 2017, Cicero Research.


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Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. We recommend investors seek professional advice before deciding to invest. Issued: October 2017 and December 2017. CAM06251.