Money

How to enter the international advice market

Published

2 hours ago

September 20, 2024

The ebb and flow of the global economy means that, as some people migrate to the UK, others leave it, creating opportunities for international financial advice.

The new Labour government has confirmed that the current tax regime for non-UK domiciled individuals will be replaced with a residence-based test from 6 April 2025, so international advice firms can expect more enquiries.

If UK advice firms want to develop a global presence, how should they go about it?

Working out the options

Branching out internationally is not something that can be achieved on a whim. Advisers must obtain the relevant permissions to advise in different parts of the world, and know how to navigate the quirks of various tax jurisdictions.

We’ve all heard horror stories of people moving out [of the UK] and it not being what they expected

Qualifications and regulatory requirements can vary greatly between countries and the location in which an adviser is based will also have practical implications for the areas they can cover.

“If I wanted to live in the US, doing a load of Australian exams would be pointless,” says Chris Ball, co-founder of international advice firm Hoxton Capital Management.

“It would be impossible — or at least very difficult — to be on the same time zone. But I could do the UK and Europe from there.”

One way for UK firms to start out is by partnering another firm that is already established in the international advice market. But this market comprises a wide range of businesses, with varying reputations and ways of operating, which means that, to do it properly, there is no fast-track entry.

A basic UK Level 4 qualification would be expected by most companies now

“You’ve got companies that are very commission and sales driven; then you’ve got companies that are fee based and more financial planning focused,” says Ball.

Being selective

Ball says UK advisers should ensure they do their homework on prospective partners and be wary of whom they get into bed with.

“I think a lot of people do that, but we’ve all heard horror stories of people moving out [of the UK] and it not being what they expected,” he says. “No one wants to be in that position.”

According to Academy of Life Planning chief executive Steve Conley, the advice industry in some countries resembles that of the UK as it was 20 years ago, with product sales being incentivised by commission, and ‘bad apples’ appearing in different guises through phoenix firms.

You’ve got companies that are very commission and sales driven; then you’ve got companies that are fee based and more financial planning focused

Conley believes international advice firms should charge fixed fees for financial planning to “eliminate conflicts of interest, promote trust and advocate market integrity”. He suggests UK advice firms seek to partner a well-established firm that has highly qualified advisers and good, independent customer reviews.

“Don’t go by the awards they have won because there are a lot of vanity awards in this industry. They can be paid for rather than be voted for by the public,” he says.

A question of quality

Diane Bentley, a former nurse, lost half her pension when an international advice firm advised her to transfer her National Health Service pot to an overseas Qrops pension scheme when she moved to France. Now back in the UK, she runs a Facebook group providing support to others who have experienced bad offshore advice.

Bentley says that, because the international advice market is commission led, the incentive to get more UK pensions offshore becomes extremely risky.

The stereotype of a second-hand car salesman going to Dubai to become a financial adviser is pretty much gone

“It is poorly regulated and the advisers are badly trained. We want them trained to the UK standard — a minimum of Level 4,” she says.

“Why shouldn’t we expect the same standards as people onshore are getting?”

Ball acknowledges that the international advice market has had its problems, but says it is cleaning itself up.

“A basic UK Level 4 qualification would be expected by most companies now,” he says.

“And the stereotype of a second-hand car salesman going to Dubai to become a financial adviser is pretty much gone. The quality of people here in the Middle East and in Australia advising British expats is really good.”

This article featured in the September 2024 edition of Money Marketing.

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The Morning Briefing: IHT receipts rise as speculation mounts ahead of Budget and How to enter the international advice market

Published

6 mins ago

September 20, 2024

NewsAdmin

The Morning Briefing: Phoenix Group scraps plans to sell protection business; advisers tweak processes

Good morning and welcome to your Morning Briefing for Friday 20 September 2024. To get this in your inbox every morning click here.

IHT receipts continue to rise as speculation mounts ahead of Budget

The Treasury collected £3.5bn in inheritance tax receipts between April to August, latest figures from HMRC published this morning (20 September).

This is £300m higher than the same period last year.

Another record-breaking year for IHT receipts is being predicted and experts believe this upward trajectory will continue year on year and hit £9.7bn in 2028/29.

However, there are rumours that IHT will be increased next month when the new Labour government unveils its first Budget.

How to enter the international advice market

The ebb and flow of the global economy means that, as some people migrate to the UK, others leave it, creating opportunities for international financial advice.

If UK advice firms want to develop a global presence, how should they go about it?

Quote Of The Day

The complexity of the current system often leads to confusion and inequities.

-Shaun Moore, tax and financial planning expert at Quilter, comments on latest IHT receipts which hit £3.5bn as rumours of tax changes build ahead of October budget.

Stat Attack

New research from independent SME funder Bibby Financial Services (BFS) reveals that UK SMEs consider tax incentives and access to finance as two critical areas that need to be addressed by the Government to unlock growth.

52%

Over half of SME leaders say they are more likely to make major investments now that the election has taken place, and

63%

say lower interest rates make them feel more confident about capital expenditure.  However, amid speculation that capital gains and inheritance tax rises could be announced as part of the Autumn Budget

87%

nine in ten (87%) SME leaders cite better tax incentives as a specific measure they’d like the new Government to implement. A further

81%

want access to low interest financing for business expansion and job creation.

Source: Bibby Financial Services

In Other News

FE Fundinfo has announced the release of its enhanced Factsheet Production solution. This automated system will streamline factsheet production and distribution to FE fundinfo’s network within a single workflow. It offers a user-friendly interface with a progress dashboard, supports approve/reject workflows, provides a comprehensive audit trail, and includes a 10-year archive.

With the capacity to produce up to 150,000 documents per hour and support for translations into 30 languages, it is scalable and compliant, enabling asset managers to efficiently manage their global operations.

Integrated into FE fundinfo’s comprehensive end-to-end platform, the Factsheet Production solution provides asset managers with a single, trusted source of data. This golden source enables connections with distribution networks, regulators and investors, ensuring the automatic dissemination of factsheets.

“Asset managers today are facing unprecedented challenges, from regulatory pressures to the need for process optimisation in a rapidly changing market,” said Joerg Grossmann, chief product officer at FE fundinfo. “Our enhanced Factsheet Production solution is designed to help meet these head-on.”

SimplyBiz has announced over 1,000 Defaqto Engage licences have been adopted by its member firms since an enhanced version of the financial planning system was added to its core membership package five months ago.

Forming part of SimplyBiz’s suite of market-leading technology solutions and designed to help advisers manage regulatory risk, increase efficiencies, and deliver better services to clients, Engage brings together a range of previously standalone modules, from risk profiling and cashflow modelling to pension, product, and platform switching, into a single comprehensive package.

Used by around 30% of UK advisers, Engage is powered by Defaqto’s data which covers more than 21,000 funds, platforms, DFM MPS, and products, with recommendations of £43bn going through the system annually.

Legal & General Group Protection has partnered with Vocational Rehabilitation specialist Ergocom to provide employees with the support they need following a Group Income Protection (GIP) claim.

It’s designed to help both the employer, and their employee understand what job roles the individual can do, and what is needed for them to continue working in a new role.

This service will be made available following a GIP claim, where the employee is ready to work, but due to personal circumstances, they can no longer fulfil their previous role and, as a result, will be supported to seek alternative options. This new service has the potential to include everything from individual assessment and detailed reporting, to coaching which helps the employee develop additional skills and confidence.

Ergocom’s Vocational Redirection Assessment will examine the employee’s vocational strengths, needs and career potential, considering any barriers or functional limitations to identify suitable, alternative roles.

Government borrowing in August highest since Covid (BBC)

Ministers and union leaders to hold crunch talks over workers’ rights plans (The Guardian)

Nike chief executive John Donahoe to step down (Financial Times)

Did You See?

The Financial Conduct Authority has launched an investigation into pure protection and it’s safe to say it’s pretty damning, writes Andrew Gething, managing director at MorganAsh.

Not only is the regulator ordering insurers and intermediaries to remove products that do not offer fair value, it’s weighing up action to address these issues, as well as not demonstrating good customer outcomes.

It’s a stark reminder of the regulator’s intent to enforce the Consumer Duty, which is now in full force. In fact, the FCA highlighted its commitment to engage with both GI and protection, as well as relevant trade bodies, to ensure its expectations are recognised and acted upon urgently.

A key shortcoming identified by the regulator was an inability by firms to demonstrate how they assess whether a product delivers fair value to all customers, including vulnerable or outlier groups.

Read the full article here.

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Money

Britain’s ultra-wealthy exit ahead of proposed non-dom tax changes

Published

4 hours ago

September 20, 2024

NewsAdmin

Britain's ultra-wealthy exit ahead of proposed non-dom tax changes

Street scene in Old Bond Street, Mayfair, London, United Kingdom.

Pawel Libera | The Image Bank | Getty Images

LONDON — Monaco, Italy, Switzerland, Dubai. They’re just a few of the destinations trying to lure away the U.K.’s uber wealthy ahead of proposed changes to the country’s divisive non-dom tax regime.

Almost two-thirds (63%) of wealthy investors said they plan to leave the U.K. within two years or “shortly” if the Labour government moves ahead with plans to ax the colonial-era tax concession, while 67% said they would not have emigrated to Britain in the first place, according to a new study from Oxford Economics, which assesses the implications of the plans.

The U.K.’s non-dom regime is a 200-year-old tax rule, which permits people living in the U.K. but who are domiciled elsewhere to avoid paying tax on income and capital gains earnings overseas for up to 15 years. As of 2023, an estimated 74,000 people enjoyed the status, up from 68,900 the previous year.

Labour last month set out plans to abolish the status, expanding on a pledge set out in its election manifesto and stepping up earlier proposals by the previous Conservative government to phase out the regime over time. It comes as Prime Minister Keir Starmer had pledged to improve fairness and shore up the public finances, with further announcements expected in the Oct. 30 Autumn budget statement.

Finance Minister Rachel Reeves has said that scrapping the program could generate £2.6 billion ($3.45 billion) over the course of the next government. However, Oxford Economics’ research, which was produced earlier this month in collaboration with lobby group Foreign Investors for Britain, estimates the changes will instead cost taxpayers £1 billion by 2029/30.

“We are ringing out the alarm bell that this is a perilous time,” Macleod-Miller, CEO of Foreign Investors for Britain, told CNBC over the phone. “If the government doesn’t listen they’ll put at risk revenues for generations.”

Other countries are smelling the fear and actively promoting their jurisdictions.

Leslie Macleod-Miller
CEO at Foreign Investors for Britain

Under the proposals, the concept of “domicile” will be eliminated and replaced with a resident-based system, while the number of years in which money earned abroad goes untaxed in the U.K. will be cut from 15 to four.

Individuals will also have to pay inheritance tax after 10 years of U.K. residency and would remain liable for 10 years after leaving the country. They will also be prevented from avoiding inheritance tax on assets held in trust.

However, Macleod-Miller, a private wealth practitioner who launched the lobby group in response to the proposals, said the changes would stymy wealth generation and is instead calling for a tiered tax regime.

According to the Oxford Economics research, which surveyed 72 non-doms and 42 tax advisors representing a further 952 non-dom clients, virtually all (98%) said they would emigrate from the U.K. sooner than previously planned if the reforms were implemented. The 72 non-doms surveyed were said to have invested £118 million each into the U.K. economy.

The majority (83%) cited inheritance tax on their worldwide assets as their key motivator for leaving, while 65% also referenced changes to income and capital gains tax.

Where the wealthy are moving

It comes as other countries are shaking up their tax regimes to incentivize wealthy investors.

Switzerland, Monaco, Italy, Greece, Malta, Dubai and the Caribbean island of the Bahamas are among the various destinations proving most attractive to wealthy investors, according to industry experts and agents CNBC spoke to.

“Wealthy investors have a lot of choices now and a lot of domiciles are fighting for them,” Helena Moyas de Forton, managing director and head of EMEA and APAC at Christie’s International Real Estate, told CNBC.

Moyas de Forton, whose team advises clients on international relocation, said Labour’s plans were the latest in a string of political developments which have shaken the U.K.’s reputation as a safe haven over recent years.

Monte Carlo skyline surrounded by sea and mountains, Monaco.

Alexander Spatari | Moment | Getty Images

“It’s just another hit,” she said. “I’m not sure if they’re all leaving but definitely they’re questioning and taking their time to see what’s changing.”

A record number of millionaires are expected to leave the U.K. this year, according to a June report from migration consultancy Henley & Partners, which cited the July general election as adding to a period of post-Brexit political flux. It is estimated that Britain will record a net loss of 9,500 high-net-worth individuals in 2024, more than double last year’s 4,200.

“It is definitely a danger. The markets are so fungible nowadays. It’s easy for people to move home. It’s easy for people to move their businesses,” Marcus Meijer, CEO of real estate investor Mark, told CNBC’s “Squawk Box Europe” of the non-dom changes last week from Monaco.

A lot of people are worried. They would rather get out now before it’s too late

James Myers
director at Oliver James

Among the alternative offerings available to the ultra wealthy are indefinite inheritance tax exemptions in Monaco, Malta and Gibraltar, and an absence of income, capital gains and inheritance tax in Dubai. In Italy and Greece, flat tax regimes allow the wealthy to avoid paying tax on their worldwide assets for an annual fee of 100,000 euros for up to 15 years.

Italy last month doubled its fee for new arrivals to 200,000 euros ($223,283) in a move its economy minister said was designed to avoid “fiscal favors” for the wealthy. However, Macleod-Miller said the regime would likely remain appealing to the top 1% even at a slightly higher rate.

“Other countries are smelling the fear and actively promoting their jurisdictions and attracting their investment and their families,” Macleod-Miller said.

“Italy is one of those countries which is courting the wealthy and seems to think if you treat them well they will contribute,” he added.

UK prime real estate faces a hit

That is also impacting the U.K.’s prime real estate market. James Myers, director at London-based luxury real estate agency Oliver James, saw an uptick in sales activity in anticipation of Labour’s election in July. But now, around 30% to 40% of clients are lowering asking prices to generate a quicker sale.

“A lot of people are worried. They would rather get out now before it’s too late,” Myers told CNBC over the phone. Many of Myers’ multimillionaire and multibillionaire clients have already started to put down roots in Monaco and Dubai, with Italy “becoming a thing” more recently, too, he said.

Transactions in London’s super-prime residential market, which covers homes valued at £10 million and above, fell 22% in the year to July compared to the previous 12 months, according to whole market data published Wednesday by property agency Knight Frank.

Elegant townhouses in South Kensington, London, England, UK.

Benedek | Istock | Getty Images

The decline was most pronounced in properties valued above £30 million, with just 10 sales generated compared to 38 the previous year, which the report attributed to higher buyer discretion.

Stuart Bailey, Knight Frank’s head of super-prime sales for London, noted that Autumn Statement uncertainty had now replaced election uncertainty, with non-doms not the only group being spooked by Labour’s anticipated tax changes.

Ultra-wealthy U.K. citizens, who are typically highly active in the super-prime market, are also in “wait and see” mode ahead of possible changes to capital gains and inheritance tax. It follows previously announced VAT (tax levy) charges for private schools.

“Non doms are a sector of that super-prime market, but they’re not the be all and end all,” Bailey said over the phone.

That is, however, creating opportunities for other investors, Bailey noted. U.S. citizens, who are already subject to U.S. tax on their worldwide assets, and so-called 90 dayers, whose annual stay in the U.K. falls below the tax threshold, could ultimately benefit from reduced competition.

“U.S. buyers, especially those sitting on a lot of cash, would be crazy not to think it’s a good time to buy right now,” he said.