Helping a busy professional plan for the future

Background

Our client, 42, is a recently appointed partner at one of the Big 4 accountancy firms. She has advised on a wide range of transactions in the course of her career and is knowledgeable about financial markets. Divorced with a child, she currently earns in the region of £475,000 gross per annum and has a pension, savings and investments worth £1.5 million. She owns a property in London with a £700,000 mortgage secured against it. The client was introduced to us by her uncle, who has invested with Cazenove Capital for many years. 

Key need

Our client was looking for advice on longer-term planning. She has high outgoings in the medium term as she is paying off her mortgage and funds the majority of her child’s education costs. However, she wants to build an asset base that will provide her with financial independence in her mid-50s, giving her the freedom to continue working, change career or retire. To achieve this, she estimates she will require £100,000 per annum, in today’s terms, and have an unencumbered property.

The client also wants to step back from personally managing her investments even though she had done so successfully in the past. This is due to both the time involved and the implications of the compliance restrictions imposed on her as a partner of a firm that audits a large number of global companies, including investment houses. This has made managing her investments even more time-consuming as inadvertent failure to observe the rules can result in substantial personal fines or indeed dismissal.

The solution

We used cash flow modelling to help the client visualise her requirements in the years ahead and advised her on the investment strategy that could best meet her objectives. The key elements of the plan we implemented for her included:

• The use of investment vehicles that have been pre-approved by the firm’s compliance department, meeting the investment restrictions but also allowing active management of the underlying investments held within the funds.
• Transfer of existing ‘personal’ investments on an ‘in-specie’ basis so as not to give rise to an immediate tax charge. These will be managed and reinvested in our preferred investment approach over time.
• Consolidation of all pension assets into a self-invested pension plan (SIPP), allowing for the proactive management of existing pension funds and for future pension contributions and associated tax reliefs.
• Using all the major tax allowances available such as ISAs and capital gains tax exemptions.
• Investing a proportion of her existing investments into an offshore investment bond, managed by Cazenove Capital, to defer taxation on capital growth and enable her to build capital that can be drawn on tax efficiently in the future to meet some of her future spending needs.
• Investing the ISA, private portfolio and offshore bond portfolio in accordance with a “balanced-risk” mandate to provide a degree of capital protection in the medium-term. The SIPP is invested under a higher risk mandate with a focus on long-term capital growth

The client now enjoys speaking with her portfolio manager on a periodic basis to stay informed of our views on markets but is relieved at not having to spend so much time monitoring her investments. Her administrative burden has also been greatly reduced.

She also reviews her cash flow modelling with her wealth planner on a regular basis, in particular to discuss the allocation of her excess income when profit distributions from her firm are received.

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This strategy was based on our understanding of prevailing tax legislation at the time and should be reviewed on a regular basis in light of changes in legislation and personal circumstances. You should obtain professional advice on taxation where appropriate before proceeding with any investment.