Tax Wrapper Analysis

EpochRob

So now that Fidelity have discontinued their tax wrapper analyser (tick box for satisfying compliance)......does anyone have any equivalent tools they now use?

Thanks muchly :-) 

richardgough

Have to say I was never convinced on these. First started to see them when we saw changes to CGT becoming effectively part of income (now back to taxed almost on its own merits). A number were produced by life offices which tended to "skew" the answer towards a bond. Cant think why!!!

Anyway, the key issue I guess is the number of moving assumptions you have to make in order to come up with a robust answer - investment amount, time horizon, different charging structures, growth rate (and yield), and what type of yield, and what tax rate is client subject to etc. not forgetting of course potential future changes to tax legislation.

To my mind, if investing for personal clients then obviously ISA to start with then I would normally use a direct investment portfolio - up to about £200,000 per individual would almost certainly enable you to avoid CGT on the portfolio and possibly even £300,000. There are, though, cases where a bond is a better option (even to extent of not using an ISA).

Above this it gets trickier and in reality there is no right answer - it has to be judged on the merits of each case and depends upon what client's future needs are and also to some extent the level of potential administration a client may have to undertake - tax returns v no tax returns etc.

If investment is in trust then bond probably best, but not always. Again depends on exact circumstances. And this is really where your skill as a paraplanner comes to the fore - understanding the various mechanics of each option and setting out why your recommended option provides a good outcome.

I don't see how you can rely on a third party piece of software for deciding on an investment wrapper as a viable compliance tick box unless you understand exactly how the software has been programmed, and if you know that then you don't need the software you can sue your own excel spreadsheet or similar.

If everything could be done via a tool we wouldn't be needed as much - and there in lies a much different AI discussion!!

benjaminfabi

That's a great response Richard. Thanks for taking the time to do it.

We now have so many different allowances and exemptions that a tech widget to give you the answer is no longer viable. It really is for us as paraplanners to get into the detail and figure out how best to utilise personal savings allowance, dividend allowance, CGT exemption, pension tax relief (not forgetting EIS/AIM portfolios) and build the strategy.

The current future is definitely one in which the best strategy is likely to involve a multi-wrapper strategy.

EpochRob

Thanks both.  How we used the Fidelity tax wrapper analyser previously was more as a starting point which we then moulded our recommendations around with further consideration into a clients individual circumstances, objectives and allowances etc.  Generally this would be using in house spreadsheets, our own cashflow modelling tool etc and then summarised in a suitability note for file etc to cover off the why's and where's etc.

We definitely like to diversify across tax strategies where possible and ensure full use of allowances in the first instance.

Thanks a lot

Rob