As a follow on from our successful guide on Business Relief products, Dr Brian Moretta appeared on GrowthInvest’s Adviser Hour to have a live discussion on this area of the market.
Although BR has been available for decades, its popularity has surged in the past few years as increasing numbers of people accrue estates that may be subject to inheritance tax. Both the value of assets invested, and the number of products, has grown very quickly.
We have identified many issues, some small, some very significant, that advisers and clients need to consider in their decision making. Some of the key ones are:
- Strategy analysis: What are the businesses actually doing and what risks are they taking?
- Lack of transparency: Six managers publish only abbreviated accounts for their products. This is a choice, and it makes it difficult for external analysts to confirm what is going on in a business. Furthermore, particularly for the larger schemes, the nesting of subsidiaries and sometimes inconsistent consolidations only serve to obscure matters further.
- Poor disclosure: Fees are the most noticeable area but there are others. Key Information Documents (KIDs) have helped but many products are exempt. In many cases, indirect fees are still obscure and other costs can be substantial. For example, in the past three years, listed renewable energy funds have outperformed comparable BR products by several percentage points a year. A large part of this gap is a relative cost disadvantage.
- Weak governance: Only three managers have products with a board in which the majority of directors are independent of the product manager. Six companies have products with no non-executive directors.
We welcome your questions and comments on our work in this area.
Please contact Vilma Pabilionyte for further information.