Wealth management group Kingswood has launched an Aim IHT and Isa portfolio service.
The discretionary investment management service offers both income and capital growth within a structure designed to mitigate inheritance tax liability after two years.
The launch is in response to clients’ growing inheritance tax needs. Kingwood said that over the past 20 years, a large proportion of people invested in Isas because of the tax benefits, without considering the IHT liability on death.
IHT bills continue to soar in the UK, as International Adviser recently reported receipts between April and December 2022 totalled £5.3bn ($6.5bn, €6bn).
According to Kingswood, more than six million of the UK’s circa 22 million Isa investors are now over 65 years old, and are faced with the dilemma of either keeping the money in the Isa despite the potential IHT liability or transferring it into an inheritance tax planning vehicle. While this would reduce IHT liability, it would also mean losing control of the assets and waiting several years before the tax liability is mitigated.
The new service allows clients to keep the tax break of their Isa and, after two years, qualify for 100% IHT relief as well. With investments in companies listed on the Alternative Investment Market (Aim), the service also means clients can retain control of their investments at all times, the wealth manager said.
Investors will have a portfolio of 25 to 40 companies selected by Kingswood and independently assessed on suitability for business relief, which allows an unlimited amount to be invested at any time and typically becomes IHT-effective after two years. The portfolio is spread across a variety of investment sectors to provide diversification.
The offering sits within ‘Kingswood Personal’ a bespoke investment management service, which was bolstered by the acquisition of Iboss Asset Management in November 2021.
Paul Surguy, managing director at Kingswood, said: “We recognised the growing need and demand from our clients for estate planning services and built an easy-to-use, speedy solution which simultaneously helps mitigate IHT and target portfolio growth via diversified investments in Aim-listed firms.”
Concerns
This comes as RBC Wealth Management found IHT planning is the number one immediate concern of high net worth individuals in the UK.
IHT is of particular concern for almost half of those aged over 66 (45%), but 72% of all respondents feel they need guidance on taxation and efficient planning.
Not knowing the amount of wealth needed to maintain lifestyles in retirement and later life is the second greatest concern for HNWs overall, particularly for those in pre-retirement ages (38%) and women (33% compared to 21% of men).
This is less of a concern for younger respondents (17% of 25-34 year olds and 21% of 35-54 year olds).
The third major concern is gifting without losing control or giving too much too soon, particularly for those aged over 55 (30% vs 17% for 25-54 year olds).
Some 19% of over 55 year olds said they worry about transferring wealth to beneficiaries prematurely to help navigate the rising cost of living, compared with 22% of 35-54 year olds.
Financial education and next gen
Nick Ritchie, senior director of wealth planning at RBC Wealth Management, said: “We continue to see the detrimental impact of low levels of financial education in the UK and the subsequent concern around managing, preserving and transferring wealth.
“Ultimately whether young or old, newly wealthy or from well-established generations of wealth, there should always be a place to learn, grow and challenge what clients know about personal finance. Working with a wealth manager will help high net worth individuals on this journey and ensure that plans remain future-proofed and fluid in line with their evolving goals.”
Katherine Waller, head of new sales delivery at RBC Wealth Management, added: “In recent years, we’ve increasingly seen diverging generational attitudes towards wealth management and how wealth should be invested.
“Now more than ever, it is crucial for wealth managers to adapt and offer highly personalised services to meet the diverse needs of clients. This includes forming multi-generational teams, using financial education to help resolve conflicts around wealth management and understanding what and whom else might influence decision making.
“Catering to a more tech-savvy generation, often with a higher risk appetite and greater focus on values, means carefully considering communication channels and how we engage with them.”
For more insight on UK wealth management, please click on www.portfolio-adviser.com
