Case Study: The Young Accumulator

Mr “YA” aged 35, married and running a tenanted Farm. Also trying to manage his elderly parents investments and financial affairs whilst at the same time running his own business and trying to generate wealth for himself and his wife.

Challenges:

• Placing his trust in an Adviser to manage investment strategies for his Parents at same time as advising him on how to eradicate debt and build wealth.
• Affairs were very disjointed and disorganised
• Risks not properly understood and clients views on risk not reflected in existing investments
• Mortgage was not competitive and was using more of regular income than necessary.
• No grasp of income & expenditure.
• A large potential IHT liability existed based on parents total wealth, which concerned all the family but no planning done to date.

What we did:

• No immediate changes made to investment portfolio. Initially detailed valuation analysis & commentary provided for an agreed fee.
• Introduced Discretionary Fund Manager to take on management of parents investment portfolio saving the client time and mental hassle so he could run the farm.
• Full analysis of income and expenditure suggesting savings such as the cancellation of plans that were no longer appropriate, saving the client more than £1,500 pa. Set up plan to repay debt in 2 years.
• Enduring Power of Attorney set up for parents
• Full review of clients’ pension arrangements including regular funding into portfolios matched to his views on risk, ensuring that Company pension contributions were used, utilising tax relief and enhancing clients own retirement benefits.This saved £2,400 pa in tax and created a further retirement nest egg for the client and his young family
•  A range of Inheritance Tax planning solutions set up using trusts to hold wealth which was still under control of parents but in time would fall outside their estate. Saved £130,000 in IHT as a result.

Results:

• Client and Parents had huge “weight” lifted in the knowledge that the investment portfolios were being managed effectively by professionals with regular reporting back to them. The portfolio showed significantly reduced volatility and delivered an average of 8% pa in growth
• A clear defined and documented strategy was adopted which is referred back to at regular reviews (6 monthly). This removed the hassle and pressure from the client but still left him with control over everything.
• IHT savings £45,000 were made immediately and further savings of £85,000 will come into play over the next 7 years.
• Retirement plans were significantly enhanced by extracting cash from the business allowing client to build up a fund which will exceed £300,000 by the time they retire providing the client a degree of comfort and security for the future.
• By reviewing and reducing the clients expenditure on unnecessary outgoings £10,000 of debt was repaid in 12 months, furthermore a cash reserve of £10,000 was created within 3 years.
• Client felt that he was “set free” to concentrate on doing the thing he loved - running his business.