According to research from Skandia International, part of Old Mutual Wealth, 58% of advisers said they would rather their fee was settled from within the investment held in trust. The remaining 42% said they want the trustee or client to write them a cheque rather than the fee be facilitated by the provider.
If a fee is taken from the trustee’s bank account, perhaps through the payment of a cheque, then the trust will become subject to self-assessment. However, fees taken from within the trust may not be subject to self-assessment, said Skandia, although this will depend on the underlying investment and the amount encashed.
Skandia, which of course offers advisers the option of taking fees from within the trust, added where there are multiple personal trustees, having the payment come out of the trust may be easier to administer, rather than trying to split the costs. Furthermore, Skandia said taking fees from the trust means, on the death of the client, the adviser can continue to give advice, knowing they will be remunerated.
Advisers and their clients will need to consider the best approach to take when it comes to paying fees to ensure they mitigate any adverse tax consequences, said Skandia. For example, where the settlor is not able to benefit from the trust, any advice fee taken from the trust could impact the IHT efficiency of the trust if they are advising the settlor. However, the adviser could take fees from the trust if they are advising the trustees without impacting the IHT efficiency of the trust.
Paul Schrijver, technical specialist at Skandia International, said: “In this new world of paying fees rather than commission, many advisers and their clients still prefer to facilitate the advice fee through the product inside the trust rather than by cheque from the trustees or the settlor.
“We have ensured we can meet this demand by making sure our trust range can facilitate fee payments in this way. Taking a fee from the product can help all parties better manage and administer the trust, and ensure continuity of trust management and fee payment even after the client has passed away.”
