Financial Planning Report

Transcription

1 {{TOC}} Financial Planning Report Prepared for: Mr & Mrs A Client Logos, Headers and Footers can all be applied to your front page Prepared by: Independent Financial Adviser Paraplanning Online Penylan Mill Coed-y-Go Oswestry Shropshire SY10 9AF 06/04/2016 You can style your report by choosing one of PPOL s many Style options or create your own style 1

2 Executive Summary Dear Alan & Anne Following on from our recent meetings I have set out for you in this report my recommendations and the agreed actions relating to the investment of a lump sum. Anne, your late aunt has left you an inheritance from which you have already set aside funds for expenditure and emergencies. For the balance of 15,000, your priority is to invest this lump sum over the longer term. You would like use the funds to support your children's higher education. The investment objective is therefore capital growth. Alan, you are happy with your own savings and investments and do not require us to undertake a review of these at this time. A review of Anne s General Investment Account has been included within this report. It was agreed to invest 15,000 into a Stocks & Shares ISA for Anne in order to make use of the new tax year allowance. The investment strategy will be structured to meet your capital growth objective and will be invested in line with your attitude to risk. A summary of my recommendations for your lump sum investment is set out below. Existing Investments Ownership Type Company Current Value Action Anne Client General Investment Account AXA Elevate 20,000 Retain Proposed Investments Ownership Type Company Initial Investment Anne Client Stocks & Shares NISA AXA Elevate 15,000 Under our ongoing servicing agreement, I will ensure a regular review of the underlying investment strategy is undertaken to make sure it remains in line with your overall attitude to risk and continues to offer you the best prospects of capital growth. There will also be an annual taxation consideration of your investments so that over time all of your existing GIA funds can eventually be sheltered within a tax free ISA wrapper, using a technique known as Bed & ISA'. 2

3 SUITABILITY REPORT Introduction and Basis of Advice I am authorised as an Independent Financial Adviser and I can confirm you have been provided with a copy of our Client Agreement, our Terms of Business, the services we offer and how we can be remunerated for these services. My recommendations that follow are based on my understanding of your current financial position and objectives. The report should be read in conjunction with the relevant illustrations, fee disclosure and Key Features documents; I do stress that if you do not understand any of the information then please contact me as a matter of urgency. I would also mention that if any information has not been disclosed, it is possible that my advice may not take account of all your personal requirements and could ultimately have been different. Summary of Current Position & Objectives Please find below a summary of your current position: Name Mr Alan Client Mrs Anne Client Date of Birth 01/01/ /02/1967 Marital Status Married Number of Financial Dependants 2 Occupation Company Director Nursery Nurse Employment Status Employed Employed Tax Status Higher Rate Tax Payer Basic Rate Tax Payer Monthly Net Income ( ) 3,500 1,500 Monthly Expenditure( ) 3,000 Joint Total Assets ( ) 500,000 Total Liabilities ( ) 100,000 Joint Smoker No No State of Health Good Good Alan, your income comprises of 5,000 of dividends paid annually and a basic salary paid monthly. A non-guaranteed annual bonus may also become payable on top of the income shown at the company financial year end on 31st March Your children are aged 12 and 13 and remain financially dependent upon you. The assets shown above are as at the date of our most recent meeting and comprise: Main Residence - 400,000 (Joint) Possessions - 20,000 (Joint) Cash at Bank - 5,000 (Alan) Cash at Bank - 20,000 (Anne ) Cash ISA's - 15,000 (Alan) Cash ISA's - 20,000 (Anne) GIA - 20,000 (Anne) There are frequent Notes Boxes within the software that enable the user to create free text in key areas. A Report Template Editor tool allows the user to also make permanent edits. 3

4 Investment Knowledge & Experience We discussed your knowledge and experience of financial products and investments. You confirmed to me you have some knowledge and some previous experience of investing Attitude to Risk We discussed at some length your attitude to risk and in particular the relationship between risk and reward. The agreed risk profile is as follows. The attitude to risk and capacity for loss Your risk profile is summarised as follows: definitions can be defined during your license set up and can also be edited when required Anne s Investment Attitude to Risk: Balanced You prefer to invest in broad range of core stock-market linked investments, where the overall returns achieved are more closely linked to the performance of the underlying assets. In so doing, this will provide you with the potential to benefit from real capital growth. However, you should be aware that investment values will fluctuate according to market conditions. Capacity for Loss: Moderate Your sensitivity to volatility is realistic and you recognise that markets fluctuate and that some short term volatility must be accepted in order to achieve your investment objectives. You have sufficient assets outside of your portfolio and an investment time horizon far enough in the future to withstand small to medium losses without any detrimental effect to your living standards. Your capacity to loss threshold would be no more than 20%. If you feel that this does not accurately reflect your attitude to risk or capacity for loss please contact me as a matter of urgency. 4

5 Review of Existing Investments Further information concerning the following investments can be found in the Appendix of this report. General Investment Account AXA Elevate - AX Mrs Anne Client Original Investment Date Invested Additions Withdrawals Current Value 18,000 01/02/ ,000 This is currently invested as follows: Portfolio Description Objective ABC Portfolio Risk Rated Model Portfolio The underlying funds are as follows: ABC Portfolio Capital Growth Risk Rating Initial Charge Annual Management Charge Ongoing Charges Figure Allocation Balanced 0.0% 0.78% 1.02% 100% The charges are automatically aggregated, saving you time Fund ABC 123 XYZ 345 Description Objective Sector Multi Asset Fund Multi Asset Fund Capital Growth Capital Growth Global Equity Mixed Investment 20-60% shares Risk Rating Fund Rating Initial Charge Annual Management Charge Ongoing Charges Figure Allocation Balanced A 0.0% 1.0% 1.35% 50.00% Low AA 0.0% 0.55% 0.68% 50.00% Aggregate: 0% 0.78% 1.02% 100% I have recommended this investment is retained for the following reasons: This investment plan continues to reflect your present circumstances and objectives This plan continues to reflect your risk profile The performance of the constituent funds has predominantly been above the sector averages over the longer term The charging structure of this investment is competitive when compared to similar investments available in the market place The holding company remains financially strong 5

6 Investments Recommendations Investment Vehicle Further information concerning the following investments can be found in the Appendix of this report. I have recommended that you invest into a NISA for the following reasons: This investment provides access to the investment strategy agreed tax efficiently It will provide the potential for capital growth You wish to make full use of the reliefs and allowances available to you to minimise the amount of tax you pay It will help reduce the risk associated with asset-backed investment by providing exposure to a range of professionally managed stocks and shares There will be no penalty applied on the encashment of this investment and you will be able to access your capital at any time Recommendation Summary I have recommended that the available monies be invested as follows: Ownership Investment Type Company Initial Investment Mrs A Client Stocks & Shares NISA AXA Elevate 15,000 AXA Elevate - Stocks & Shares NISA - Mrs Anne Client Initial Investment Date Invested 15,000 Post April 6th 2016 I am recommending the above for the following reasons: Elevate is a multi-award winning wrap platform from AXA Wealth which is part of the financially strong AXA Group of companies. The wrap platforms total assets under management reached 10bn as at April I can confirm the company is financially strong, has provided an excellent service to our clients and provides access to the investment strategy agreed. The charging structure of this investment is competitive when compared to similar investments in the market place The research undertaken of the market place has identified this as being the most suitable solution for your needs and objectives They provide access to a wide range of investment opportunities, making it simple to vary your investment strategy to reflect changing market conditions, or should your risk profile change in the future They provide the facility to manage your investment online. Providing access to instant valuations, fund information and other investment analysis tools They provide access to a range of model investment portfolios This is an ideal investment as there would be no redemption penalty applied on early encashment. Thus providing enhanced flexibility should additional funds need to be raised without penalty in the short term 6

7 Investment Strategy - Model Portfolio A variety of investment strategies are catered for including where it remains the same as any investment strategy so as to avoid duplication and streamline reports The investment strategy recommended is the same as that for the above General Investment Account Investment Review. I can also confirm that a Key Investor Information Document (KIID) has been provided detailing information such as charges, objectives, risk and past performance. The information is designed to assist in making a reasoned judgement on whether it is appropriate to invest in a particular fund or funds. Alternative Solutions Considered But Discounted I confirm due consideration was given to a range of alternative solutions but subsequently discounted for the following reasons: National Savings & Investments They do not offer sufficient prospects for capital growth Non-ISA Collective Investments / General Investment Account You have a brand new tax year ISA allowance available which is the most tax efficient solution for your investment objectives Pension Planning Product You are contributing to a workplace pension and do not wish to contribute any further amounts at this time Investment Trust They are generally regarded as higher risk because of their ability to borrow money in order to invest known as Gearing. This can magnify gains but also losses Exchange Traded Product This is yet to be seen as a mainstream way of investing and I believe the tracking error of many ETP solutions compared to their benchmarks is too high Onshore Investment Bond They are not as tax efficient given your circumstances Offshore Investment Bond Your tax position and residency status does not warrant the use of an offshore investment The charges associated with an offshore investment tend to be greater Structured Product 7

8 You did not wish to lock your money away for a predetermined fixed term Unregulated Collective Investment Scheme (UCIS) Such investments are not suitable given your attitude to investment risk Non Mainstream Pooled Investment (NMPI) Such investments are not suitable given your attitude to investment risk Enterprise Investment Scheme (EIS) Such investments are not suitable given your attitude to investment risk Venture Capital Trust Such investments are not suitable given your attitude to investment risk 8

9 Important Information Further Information and Risk Warnings A summary of the risk warnings associated with my advice can be found in the Appendix of this report and should be read with particular care. Additional information regarding the recommendations can be found in the Key Features Document(s) provided. Cost of Services A summary of how my company can be remunerated for the advice received and the provision of my services is detailed in the disclosure documentation provided. Our Service Proposition My company offers a number of service propositions which govern the type of service and the regularity of contact and reviews you will experience. The ongoing servicing of your plans is recommended but not compulsory and if taken up can be cancelled at any time. The associated costs of our propositions and when they commence are set out in our disclosure documentation already provided and these costs may go up or down in line with the fluctuating value of the underlying assets. I confirm that you have elected for the following service: A proactive advice service centred around your immediate issues that will require periodic review and re-planning in the future. A summary of the charges Charges Summary will be included in one place as per the FCA s directives General Investment Account AXA Elevate AX23456 Mrs Anne Client Ongoing Charges Adviser Charge 0.50% p.a. of FV (Currently 100) AC Paid By Fund Investment Management Fee 1.02% p.a. of FV (Currently 204) Platform Fee 0.3% p.a. of FV (Currently 60) Exit Charges Exit Charge Nil Proposed Stocks & Shares NISA AXA Elevate Mrs Anne Client Entry Charges Adviser Charge 3% of lump sum initial advice fee = 450 AC Paid By Client Ongoing Charges Adviser Charge 0.5% p.a. of FV (Currently 75) AC Paid By Fund Investment Management Fee 1.02% p.a. of FV (Currently 153) Platform Charge 0.3% p.a. of FV (Currently 45) Exit Charges Exit Charge Nil Effect of Charges Reduction In Yield 2.1% p.a. based on the middle illustrated growth rate over next 5 years Entry Charges: One off charges taken before or on investment. Adviser Charge: A fee paid to the adviser for advice and services. 9

10 AC Paid By Client: The Adviser Charge will be paid directly by you. Ongoing Charges: Regular charges, typically taken over a year. Adviser Charge: A fee paid to the adviser for ongoing advice and services. AC Paid By Fund: The Adviser Charge will be paid from the fund. Investment Management Fee: Or Annual Management Charge (AMC). A fee levied by the investment firm paid out of the fund for the costs of investment management and fund administration. Platform Fee: Platform Fee: A charge levied by the platform service provider for the administration and investment management of funds invested. Exit Charges: One off fees taken on termination. Exit Charge: Applicable under the plan or investment rules following early sale, surrender, encashment or transfer. Cancellation Notice Once your investment plan is set up you have a legal right to cancel should you change your mind, the period is generally 30 days (which may reduce to 14 days for NISA and Unit Trust investments and may increase to 60 days for annuities). The amount you get back may be reduced by a decrease in value between making your initial investment and up until your investment is sold. Affordability & Emergency Fund You should keep some money immediately accessible to cover any unforeseen emergency expenditure that may arise. I would normally recommend that you retain an emergency fund equal to three month's expenditure within an immediate access deposit account as a bare minimum. I confirm you are happy with the level of your emergency reserve. I would also like to take this opportunity to confirm that the above recommendations are affordable to you. Financial Services Compensation Scheme (FSCS) The FSCS was set up under the Financial Services and Markets Act 2000 and exists to protect clients of FCA authorised firms and covers deposits, insurance and investments. The scheme can pay compensation to clients who have lost money as a result of their dealings with FCA authorised firms that are unable to pay claims against them. The deposit limit for bank accounts is currently 75,000 or 150,000 for joint accounts. For investments the compensation limit is 50,000. INTUTIVE WIZARD The FSCS wording is created to reflect the product and / or investment strategy selected 10

11 Aspects of Your Financial Affairs Not Addressed But Deemed Important I practice a comprehensive approach to financial planning. To this end, I would like to draw your attention to the following. If on further consideration you wish to discuss any of the below in more detail please do not hesitate to contact me. Inheritance Tax Planning There would be no inheritance tax liability incurred on your estate at the current time Long Term Care You did not consider this a priority at the current time Retirement Planning You are happy with your existing pension arrangements Protection It was agreed that we would address this issue at a later date Wills and Lasting Power of Attorney I understand you have made a Will. I do stress the importance of keeping your Will up to date, thereby ensuring your estate passes in accordance with your wishes. I have recommended that you effect a Lasting Power of Attorney (LPA). This will ensure your financial affairs will be looked after by someone you trust if you cannot do so yourself. Having a LPA in place avoids the significant cost and delays associated with applying to the Office of the Public Guardian. Mortgage Repayment You do not wish to use your capital to repay your mortgage and would prefer to keep any excess capital within a flexible and liquid environment 11

12 Confirmation I have identified your objectives and I hope you agree that the recommendations made correspond to your current needs and future requirements. If you have any queries concerning the content of this report, or should you feel the recommendations are in any way an inaccurate reflection of your circumstances and future objectives please contact me immediately. Report written by Signature Date / / We the undersigned have received this report. We acknowledge this is a fair reflection of our conversation and confirm we have received all supporting literature including Key Features Documents, fund fact sheets and illustrations. Accepted by Mr Alan Client and Mrs Anne Client Signature Date / / Signature Date / / 12

13 APPENDIX The latest Risk Warnings, Notes on Financial Products and where applicable Technical Notes will automatically pull through to the Appendix section of the report 13

14 Optional Market Outlook data can be pulled through if required and is updated monthly by PPOL. Market Outlook The summary below is provided courtesy of Old Mutual as part of their Informer Indicator March The data shown is an indication from a collection of leading investment houses as to their predictions for the future direction of stock markets. These are Investment House views and are not fund specific. Source for monthly performance information: Morningstar Direct 31/01/2016 to 29/02/2016 (bid to bid - in sterling - gross income re-invested). EQUITIES BONDS UK UK Smaller Comps US US Smaller Comps Europe Japan Pacific Ex Japan Emerging Markets Gilts UK Corporate Global Aberdeen = = = - BNP Paribas - = = = - = = = - = + BMO (formerly F&C) = - + = Henderson = - = = = = = = - - = Invesco Perpetual = = = = = M&G + = + + = = - + = OMGI = = = = + + = Schroders = + + = + = = = = = = Consensus = = = = + + = = - = = Indices: Monthly % Performance Key + - = The fund group believes the index they are using as a benchmark will rise in excess of 5% over the next 12 months The fund group believes the index they are using as a benchmark will fall in excess of 5% over the next 12 months The fund group believes the index they are using as a benchmark will have either a positive or negative movement of between 0% and 5% over the next 12 months 14

15 Risk Warnings General The recommendations are based on current taxation, law and practice all of which may be subject to change. Any quotations provided are for illustration purposes only and are not guaranteed. For a full explanation of the charges and how they affect the plan, please refer to the personalised illustration and Key Features document(s). Investments Past performance is no guarantee of future returns. Inflation will reduce the real value of the capital invested if returns do not match or exceed the rate of inflation. An investment should be considered over a medium to long-term time frame and should not be entered into if the capital is required for other needs. The value of the investment is determined by units or shares, the price of which can fall as well as rise. The value could be less than what was originally invested, especially in the early years. Please bear in mind that the outlook for asset classes and market sectors can change and as a result the asset allocation could become unbalanced. Investing in a single or limited range of asset classes or sectors may lead to greater volatility and therefore carry a greater investment risk. A certain fund or funds may have a higher risk rating than the agreed attitude to risk, but the overall risk applied of the combined funds or portfolio is designed to meet the agreed risk profile. Equities can significantly fall in value and in difficult times dividends may reduce or stop. Where an investment is exposed to property there can be times when this is difficult to sell, meaning the investment may not be able to be cashed-in when required. Corporate bonds are not risk free as the bond issuer could default, interest rate rises could reduce the capital values and in adverse market conditions the fund could become illiquid making it difficult to sell. Where a fund invests in overseas markets, domestic upheaval and changes in currency exchange rates mean that the value of the investment can go up or down. It is important to periodically review the value of an investment against expectations and the underlying investment strategy, particularly when close to retirement. The higher the charges applied to an investment the greater the effect of those charges on the performance. Changing funds or transferring excessively, may erode the value due to transactional based fees. Any sale of investments held, including switching may give rise to a capital gains tax liability and any income generated will normally be subject to income tax. 15

16 Notes on Financial Products New Individual Savings Account NISAs can only be invested into by those resident and ordinarily resident in the UK for tax purposes. The main benefits of a NISA are their tax efficiency (see below), their accessibility (although some accounts have a notice period) and on death, the fund can be inherited by a spouse or civil partner via an additional NISA allowance. The additional allowance equal to the value of the deceased's NISA holdings and termed an 'additional permitted subscription' will be available to the surviving spouse on top of their own allowance. A maximum of 15,240 can be contributed in the current tax year and account holders can save their whole allowance in cash, stocks and shares or any combination of the two. The NISA allowance will increase in line with CPI on an annual basis. From 6 April 2016 it will be possible to replace cash withdrawals from a NISA without the replacement cash contribution counting towards the annual subscription limit. This will be allowed under new Flexible NISA rules. Flexibility can only be offered in respect of cash only holdings and may not be available from all NISA providers. Taxation No tax is paid on any of the income received from NISA savings and investments. This includes dividends, interest and bonuses. Nor is any tax payable on capital gains arising on NISA investments (however losses cannot be offset against other capital gains outside of a NISA). Inherited NISA assets awaiting transfer (either in specie or as cash) following the death of a spouse will become liable to income tax and capital gains tax from the date of death to the date of distribution of the asset value at probate. This is a temporary situation until legislation due in 2016 maintains inherited NISA funds tax free during estate administration. General Investment Account General Investment Accounts (GIAs) is a term given to investments which can hold assets but which are not allocated to a specific tax wrapper. GIAs can be owned individually or in joint names and can offer the investor a wide spread of investment risk within a professionally managed environment. Numerous categories of investments can be held within a GIA including collective style investments such as Unit Trusts, OEICs, Investment Trusts and Exchange Traded Funds (ETFs) and more tailored investments such as structured products. Taxation Dividend Distributions - are paid gross. Dividend income is taxed at nil rate within the Dividend Allowance ( 5,000 for 2016/17). Above that it is taxed at 7.5% within the basic rate band, 32.5% within the higher rate band and 38.1% beyond that. Interest Distributions - are paid net of 20% tax. This satisfies the liability of basic rate taxpayers. Nontaxpayers can reclaim the whole 20% deducted. Higher rate and Additional rate taxpayers will have a 16

17 further liability of 20% and 25% respectively of the gross distribution due via their self-assessment tax return. From 6 April 2017, Authorised Investment Fund managers will be required to pay any interest distributions gross to bring this type of investment income into line with savings interest which is currently paid gross following the introduction of the Personal Savings Allowance (PSA) on 6 April Capital Gains are taxed at the main CGT rate of 10% for non and basic rate tax payers and 20% for higher and additional rate tax payers. However every individual has an annual capital gains tax allowance that can be offset against the gains. 17