Offering tax-effective investment advice is likely to present a “major opportunity” for advisers, new research from HSBC Life has suggested.
According to the research, half of surveyed advisers’ clients are higher rate taxpayers, while nearly a third (32%) are additional rate taxpayers.
Clients rate taxation as second only to inflation as the biggest threat to their invested capital and future wellbeing. Despite this, HSBC Life said two fifths (39%) of advisers do not routinely discuss the benefits of tax efficient investments with clients and only just over a quarter (27%) of clients questioned said advisers routinely raise the subject with them. This may partly explain why basic tax allowances are not being used in full, says HSBC Life, with just 52% of clients fully using their ISA allowance and 47% the pension investment allowance.
Mark Lambert, head of onshore bond distribution at HSBC Life, said the number of clients who are additional rate or higher rate taxpayers will inevitably increase as a result of frozen tax thresholds, allowances and continuing wage inflation.
“These drivers point to the fact that clients are more likely to want and need advice on tax effective investment. This represents an opportunity to help to promote the benefit of tax allowance optimisation through regular tax health checks. Despite high client concern about inflation and interest in tax efficiency, advisers believe a relatively low percentage of clients know about or use key strategies,” said Lambert.
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