The Covid-19 pandemic has prompted a vast number of clients to delay making financial decisions, a new poll by Octopus Investments has found.
In a survey of 700 advisers, six in 10 (61%) had clients who delayed financial decisions as a result of the pandemic.
Communication was cited as a potential cause of delay, with more than a quarter (26%) of advisers admitting it had become harder to communicate with their clients over the past year, despite the increased use of technology.
More than half (53%) of advisers also said they had clients who could benefit from tax efficient investments but had not yet engaged with them on the topic, while 38% cited increased risk as a barrier to advising on them.
Paul Latham, managing director at Octopus Investments, said: “Not all tax planning will be considered urgent, but estate planning is certainly one area that some clients can’t afford to delay, as it’s often difficult to predict how soon it might be needed. The clock is always ticking.”
Octopus’ research highlighted the benefit of advisers speaking to their clients about tax planning solutions before a competitor. Of those surveyed, 39% of advisers said that recommending tax efficient investments had ensured they had not lost clients to other advisers or wealth managers. Meanwhile, a similar number (40%) said that advising on tax planning products had led to them advising on more assets for their clients.
When asked which factors are most likely to increase demand for tax efficient investments going forward, 79% cited clients who have an inheritance tax liability, while 76% said clients who are likely to be affected by their pension lifetime allowance and 65% pointed to clients who are selling or have sold a business.
Looking ahead to the landscape post-pandemic, eight in ten (81%) advisers said they expect the lifetime pensions allowance to impact more of their clients over the next ten years, while 79% said that clients have become more mindful of needing access to their money later in life, suggesting that more flexible estate planning options may be needed.
Latham continued: “Over the last decade we’ve seen pension contributions become increasingly restricted, particularly as a result of the lifetime allowance. Now that it’s frozen until 2026, more people are at risk of being caught in the net and I think we’re likely to see increased demand for tax efficient alternatives as a result. Similarly, with the Nil Rate Band and Residence Nil Rate Band both frozen too, more people are at risk of being hit by inheritance tax.”
Latham said longer life expectancy was also a crucial factor to consider for estate planning, with investments that qualify for Business Property Relief and therefore free of IHT after two years, likely to become more popular.
Susie Bewell at Raymond James Investment Services added: “Clients tend to see estate planning in black and white terms – we can keep the assets, or we can give them away. Once clients understand that it doesn’t have to be as inflexible or expensive as they may have thought, they’re a lot more open to considering estate planning sooner.”
