Mrs A, an intelligent and energetic lady in her 70’s was referred to me by an existing client. Mrs A had recently been widowed and had inherited a portfolio of shares from her late husband. He dealt with the family’s finances and as one of his hobbies was buying and selling shares there were numerous small holdings. Mrs A’s elderly mother had also recently died and left money to her daughter and also a number of shares.
Apart from grieving for her late husband and mother, the client was overwhelmed by the sheer number of investments and daunted by the endless communications from companies. Should she sell the B shares? Should she take up her rights issue? How should she vote on a particular issue? All of this was proving a great worry to the client since it was hard to distinguish which communications were important and which were not. In addition, she did not know with any certainty what her income would be neither did she know the quality of the underlying investments.
After a lengthy meeting of discussing her aims and objectives, a strategy was devised to help her. Essentially she wanted to receive a good level of income in order to enjoy a comfortable retirement and also wanted the capital to grow so that she would have money to leave to her children and grandchildren. She also wished to help her children with school fees payments and perhaps most importantly wanted someone to take away the burden of worry with dealing with a large and complicated investment portfolio. In essence, she wished the portfolio to be dealt with to enable her to enjoy her time with her family and to enjoy her other interests.
The second stage was to obtain a comprehensive picture of her financial situation and a definitive list of all of her holdings. This involved a great deal of work in writing to the various companies, obtaining up to date valuations, dealing with all the correspondence and eventually producing a list which gave a clear indication of her worth.
The third stage was a plan to meet her objectives and to remove the hassle and worry of dealing with the portfolio. Small shareholdings were sold, poor funds were also sold and those of good quality re-registered onto a platform or wrap. Some of the shares which she had an interest in and wished to keep such as Marks & Spencers were re-registered onto the platform.
We are now in the position where she has money on deposit to cover short term needs and other monies are placed with building societies paying competitive rates of interest. The vast majority of her investments are on a wrap/platform and she receives a good and regular income to complement her pension. She can see the value of her investments very easily at our review meetings. The paperwork has been greatly reduced and it means that when I visit for a review, I am able to deal with any issues and paperwork and remove the hassle from her.
With the investment position quite clear and with Mrs A comfortable with her income, we turned to the question of Inheritance Tax Planning. Her husband and Mrs A had mirror Wills and thus were not the most efficient for IHT purposes. Now she is clear about her income she is making use of the regular allowances to help pay the grandchildren’s school fees from excess income and also makes use of the annual allowances. As she is in good health she has made gifts to the children and would hope to survive the 7 years.
In addition, the money that she does not need access to but requires the income, we have established Discounted Gift Schemes which pays her a regular income that does not need to be declared since it is within the Revenue’s limits .In addition to a good income, the investments should grow and one day be passed to her children after her days. A great amount of the capital is outside of her estate immediately.
For a smaller portion of the portfolio, money has been invested in an AIM portfolio in order to be outside of the estate after 2 years. This is a riskier investment but one that is IHT efficient. Within the overall context of her investments, the AIM portfolio is a sensible addition.
All in all, the client is much happier; she has a good and regular income and a portfolio that is very easy to deal with. She is able to enjoy her retirement with her many interest and visits to her family who are spread out throughout the UK . She knows that at our reviews we can deal with any paperwork and she feels much more comfortable knowing clearly her full financial position.
Of all of the above the removal of the hassle and simplified portfolio to give the client peace of mind can not be overstated. For clients who are not in the Financial Services Industry or are not particularly interested in finance the sheer amount and complexity of the paperwork can be daunting and cause great stress.