For IFAs seeking to create robust financial planning solutions for their high-net-worth UK clients, the offshore bond can play a significant role in achieving the right estate planning, retirement and investment outcomes.
An important consideration can be where the insurer is located. This will often depend on the level of client sophistication and their approach to investment, particularly if they are considering the full discretionary management approach.
Key considerations in selecting the most appropriate jurisdiction and providing clients with reassurance that their funds are in safe hands are investor protection, legal system, cost effectiveness, experience and expertise. No single attribute can deliver on its own, so it is important to select a jurisdiction that commands a well-rounded approach.
One such jurisdiction is Ireland. The catalyst for the country’s enviable record in financial services dates back to 1987 with the establishment of the International Financial Services Centre (IFSC). Thirty years on, the financial services sector in Ireland has grown from less than 60 people employed in the IFSC in Dublin’s docklands to now employing around 40,000 people with approximately two-thirds of those based in the city. This expansion shows no sign of slowing, with Ireland’s economy reporting GDP growth at over 5% - the fastest in the EU in 2016. Another key indicator of the jurisdiction’s economic strength is the rate of unemployment which was 6.5%, down from a high of 15%, helped by the fact that last year the Irish Development Agency posted a record year of inward investment with 12,000 new jobs. The result is that over the years the country has accumulated an enviable pool of highly-educated talent and embedded financial services experience. Further evidence of the country’s continued growth is the 100 new name investors in 2016 that had no previous presence in the jurisdiction.
Ireland’s success can in part be attributed to an extensive tax treaty network and its attractive headline corporate tax rate of 12.5%. Also, advanced communications systems and a commitment at Government level that Ireland remains at the forefront technological developments, demonstrate recognition at the highest level of the need to remain competitive.
Looking more closely from perspective of the UK-based investor, what is the attraction of Ireland as a location in which to entrust their wealth management objectives?
Aside from the more obvious considerations, such as time zone and the reassurance provided by geographical proximity to the UK, its status as a common law jurisdiction with a similar legal system to the UK is also of note.
Of even more importance from a policyholder perspective are a strong commitment to international standards and policyholder protection.
For those seeking to take advantage of a full discretionary fund management arrangement aligned to their offshore bond, Ireland can provide a highly cost-effective solution. Currently, the Irish Revenue classify such bonds as a Special Investment Fund which means that discretionary management services provided by the discretionary fund manager to an Irish client are VAT exempt.
The important consideration is that while the policyholder may be based in the UK, the VAT position of a discretionary management service is based on the VAT code of the jurisdiction in which the recipient of that service is located.
The point of note here is that the discretionary fund management services are deemed to be provided to the bond provider and not the policyholder. The location of the supplier of the discretionary management service and the VAT rules of that jurisdiction are not relevant. Accordingly, as the receiver of the discretionary management services is the bond provider, who is based in Ireland, VAT is not applied. This creates a highly cost effective way for an IFA to enhance the effectiveness of their planning for high-net-worth UK clients.
Highly appropiate solution
It is clear therefore, that for UK high-net-worth clients for whom full discretionary management is the desired approach, an offshore bond from an established provider in Ireland can deliver a highly appropriate solution to meeting their wealth management needs.
Given the complex nature of financial planning it is also important to select a bond provider with the right pedigree, encompassing technical expertise and easily available support, longevity in the market and experience. Depending on the client’s situation, the ready availability of suitable trust arrangements may also be an important consideration.
As discussed at the beginning of this article, there are many important factors to consider when selecting which jurisdiction is the most appropriate for each individual client. Working with a product provider who can offer advisors a choice of jurisdiction provides an extra degree of flexibility.
With a 25 year heritage, Utmost Wealth Solutions is a provider of award-winning offshore bonds for high-net-worth UK residents. With offices in Dublin and the Isle of Man, we offer a choice of jurisdiction in addition to a range of investment options including a bond with full discretionary management. Recognising the complex and continually changing financial planning landscape, we have a team of highly-respected technical experts who are available to assist you when considering appropriate solutions for your high-net-worth clients. With £12bn funds under management and 36,000 policyholders (30 June 2017), we’re here to make a wealth of difference.
To find out how we can help you make a wealth of difference to your clients’ wealth and estate planning needs visit uTech, our online technical hub, at utmostwealth.com