Therefore if no previous contributions have been made, it may be prudent for an individual to receive a contribution of up to £225k and adjust the input period to end in the current tax year 2007/2008. This utilises the Annual Allowance for the current tax year, and preserves the maximum contribution ability for all future years. This provides the maximum amount of flexibility and contribution potential for future years for some of your best clients.

If the input period is not adjusted, then the amount that can be contributed in 2008/09 is reduced and this years allowance is not fully utilised.

If you are planning to change a client’s input period to maximise contributions, make sure that the provider is able to do this.

Here are two well written articles both of which are highly relevant to the current uncertain economic conditions:

• Preparing for a recession
• How to live with inflation

Both have been written by an American but the fundamental principals and conclusions are relevant to any economy.  The comments below each article are well worth reading too.

Friends Provident took the same action with its property fund last month.

Regular income payments, retirements and death claims will not be affected.

As real estate can take months to sell, property funds keep a proportion of their assets in cash to pay any investors who want to leave. But if unexpectedly large numbers of investors want to withdraw their money the fund can be forced into selling property cheaply because they need a quick sale.

“The level of withdrawals from our property funds has reached the stage where we now have to sell properties to raise cash to meet the requests for payments out,” the company confirmed.

For all applications received on or after January 21 until March 28 2008, clients aged under 80 and investing over £50,000 will qualify for the 1% uplift in the allocation rate on their bond. The additional commission offer of 0.25% can be claimed by advisers for all cases received.

The tide seemed to have turned back in favour of with profits last year as terminal bonuses were increased; providers seemed to be sharing in the good times of recent years although reversionary bonuses still lagged well behind cash deposits. Recent news published in this article on the Money Marketing site (shown below) indicates that returns have, rather unsurprisingly, fallen in 2007. Norwich Union and Friends Provident have been the first to report this and others are likely to follow. However, both companies have increased terminal bonuses on long term bond business.

What are your thoughts on With Profits; stay or go? Do you use any of the With Profits analysis tools and what do you think?

Norwich Union and Friends Provident are the first in a predicted line of product providers to announce plummeting returns on their with-profits funds.

Returns on Norwich Union’s with-profits fund fell by more than 50 per cent last year compared with 2006 while Friends Provident saw a 38 per cent fall in the same period. However, both life offices have increased final bonuses this year.

For Norwich Union bonds taken out in 1995, final bonuses increase from 21 to 28 per cent year on year.

The life offices say that their with-profits funds have been hit by the sub-prime crisis and volatility in the stockmarket.

But they have come in for criticism from advisers who claim that investors are not benefiting from the upside of stockmarkets but suffering all the downside when markets underperform.

The Norwich Union CGNU and CULAC with-profits funds returned 5.4 per cent in 2007 compared with 11.9 per cent in 2006 and 17.7 per cent in 2005.

Friends Provident’s fund returned 5 per cent in 2007 against 8.1 per cent in 2006.

NU marketing director David Barral says: “Stockmarkets have been volatile and UK commercial property has had a difficult time. Despite this backdrop, with-profits has delivered by smoothing returns throughout this period.”

Informed Choice joint managing director Martin Bamford says: “The way that with-profits funds seem to be invested means that policyholders do not get the benefits of the stockmarket when it is performing well but suffer the downside.

“The returns on these funds are supposed to be smoothed and protected. These figures may serve as a wake-up call to with-profits investors who may have to make tough decisions about what they do with their money.”

Paraplanning now plays a pivotal role in the modern financial planners practice but there are still advisers who are not sure what a paraplanner: is, does or should do. Because of this, many paraplanners are not used to their full potential and even worse, some are still merely used as administrators. Advisers are still unsure how to make the most of their paraplanning resource and the benefits a good paraplanner can bring to their business.

Advisers have always had assistants, however, as their businesses changed, the role of these assistants became more defined and developed into that of a paraplanner.

The paraplanner forms the bridge for an adviser between conducting the meetings with the client and getting the business issued. The paraplanner coordinates all the administration required, designs an appropriate solution in conjunction with the adviser, prepares all reports and post sale documentation and provides technical advice when required.

The Paraplanner however is not an administrator and it is important to differentiate between to two roles. Administration requires a different set of skills to that of Paraplanning in the same way that Advising requires different skills.

Paraplanning has now developed to a point where I believe it should be separated into 3 distinct ‘levels’. The ‘levels’ would be Support Paraplanner, Paraplanner and Senior Paraplanner. A paraplanners level would be dependant upon their skills, knowledge and experience and this would provide businesses with some clarity when determining what type of paraplanner they actually need.

In order to be successful as a paraplanner any individual needs to possess some basic skills such as the ability to write reports; to analyse statistics; to research appropriate products and funds; have a good understanding of compliance issues; to organize their own and their advisers time and prioritise. They must also have excellent IT skills and interpersonal skills.

The knowledge and experience however is likely to be commensurate with the level of paraplanner mentioned earlier and I would suggest the following:

• Support Paraplanner – 1 – 2 years experience, Certificate in Financial Planning
• Paraplanner – 3 – 5 years experience, some Diploma level Qualifications
• Senior Paraplanner – 5 years + experience, Full Diploma / Advanced Diploma / CFP

Structuring the role like this provides much greater clarity for both the paraplanner and the business and also provides a clearly defined career path. It is important to recognise the difference between the roles of each ‘level’ and to allocate tasks accordingly.

It is important to present to any client a team rather than a single adviser. The team approach ensures that the client always has someone to answer any immediate concerns. It would therefore not be unusual for a team, as happens at Cooper Parry, to comprise an Adviser, Senior Paraplanner, Support Paraplanner and Administrator. All have clearly defined roles and tasks within the advice process. The Senior Paraplanner is likely to be as qualified, if not more so than the adviser they work with to allow adequate case discussion and provide knowledgeable technical support.

For an adviser, the more experienced and knowledgeable your paraplanner, the greater the support they will be able to give you and your client, which, in turn will allow you to a) spend more time with your clients and b) provide them with a much more professional experience.

Paraplanners should be encouraged to develop, to learn new skills, to meet fund managers, to read the financial press. Any truly ‘independent’ financial planner who strives to offer their clients the best possible solution from across the whole industry, requires knowledge of that industry. Unfortunately, even the best financial planner cannot know everything and the procurement of knowledge should be shared across the team.

Paraplanners also require intellectual stimulation and support from other Paraplanners, much like advisers require stimulation from other advisers. My experience has told me that it is much more difficult for a Paraplanner to offer excellent support without access to the support of other paraplanners. It is important to allow paraplanners to meet with other paraplanners, to share ideas, to discuss problems and for these meetings to be a worthwhile, shared experience.

In addition Paraplanners and their skills and technical expertise should be valued much more greatly by the industry in general.

When there are round table discussions, or conferences how many paraplanners are invited to attend? Paraplanner’s technical knowledge may be greater than an adviser’s, their experience of dealing with third parties is likely to be greater and they still have client facing experience. Surely paraplanners would be able to offer as great an insight as advisers?

Similarly there are a number of paraplanners like myself, who have worked hard to achieve CFP and yet we are not recognized by the IFP. Only registered individuals can be listed on the website! From a clients perspective surely it would be advantageous to know that not only their adviser but also members of the adviser’s team have professional qualifications? Perhaps a list of companies who can provide a CFP (with a distinction for those who are authorized) would help a client make a more informed choice?

Paraplanning is a career in its own right, it should be valued as such and Paraplanners should be held in much higher esteem within individual business and the industry in general.

A small number of businesses, like Cooper Parry, do recognize the benefit a good paraplanner can bring to the business, however there are still some that don’t and it is important for the industry as a whole, that the role of the Paraplanner is valued much more highly than at present and that Paraplanners are recognized for the enormous benefits they can bring the individual businesses and the profession in general.

• Utilising the tehcnical knowledge and experience of the team
• Providing professioanl reports to set themselves apart from their peers
• Cost efficiency
• Time saving, and
• Flexibility

With smaller businesses, it is often difficult to justify employing an in-house paraplanner and even then, one paraplanner is unlikely to have the same level of technical knowledge and market experience as a team of four or five. With larger businesses, where we would be doing the majority of their paraplanning, it would be to save them the hassle of managing a paraplanning division.” Succession planning for a paraplanner within a small practice is often difficult, and so another reason for outsourcing, although many larger practices have their own internal paraplanners for this reason.

Far removed from anonymous temps, third-party paraplanners place a great deal of emphasis on building relationships with their clients, with sometimes a bit of trial and error required to find the right match between adviser and paraplanner. You’re always going to have teething problems because the paraplanner has to understand the adviser’s style and vica versa.

It does take time for the paraplanner to get to know the adviser, to appreciate the way the adviser likes to deal with the client, and the level of detail and the strategies they operate with. Establishing systems and procedures and implementing templates is another crucial part of initiating an external paraplanner/adviser relationship.

In most cases, advisers and paraplanning professionals alike say the most likely reason to terminate the arrangement would be the advising business growing sufficiently to support an internal paraplanner. Until then, in terms of time and cost, it’s far more efficient having an external paraplanning service allowing advisers to get on with giving advice, as opposed to report writing and research, which can be extremely time-consuming.

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I’ve seen virtually all of the adviser-targeted financial planning tools & packages currently available in the UK, (plus a few that aren’t but might be soon) but for quite a time I’ve been intrigued by the enigma that is Prestwood, the system pioneered by Paul Etheridge. Until now, it’s been fairly low on most people’s radars, but a change in proposition and a tie-up with 1st Software has created a buzz in the adviser community.

Yesterday, I finally got around to making the trip to Stourbridge to catch Paul Armson’s seminar on Truth, the financial planning package borne out of the Prestwood system.

Paul has been running these seminars to full houses for the last month or so, and places on the remaining seminars are disappearing fast. It seems that some serious people are getting interested in Truth, with Richard Allum of Adviser Assist and James Hay Wealth Management’s recently-departed UK sales director Stefano del Federico being just two of the dozen delegates who joined me.

And it would appear that Truth is gaining traction, with Armson claiming to have signed up 120 people in the last 3 months alone, and having somewhere between 4-500 users in total less than 6 months on from launch. These numbers are bound to grow once 1st Software switches off it’s own tired-looking planning tools and releases the next drop of Adviser Office (next week?) containing the Prestwood export option. But, the real news is that Quay Software are very close to following in 1st’s footsteps, which would give Prestwood access to over 70% of the IFA back office market plus the tacit endorsement of the two biggest players. Looks like Ben Goss’s Distribution Technology has got some unexpected and serious competition…

So, does Truth justify the hype?

Well, if your business model is about holistic financial planning, the answer has to be yes. In fact, Truth is unquestionably the leader of the pack here by some margin. If I had to attribute this view to one element, it would be the product’s maturity, which on the face of it might seem to be a strange statement given that Truth is less than 6 months old, but that would be to ignore the fact that the base Prestwood system of which Truth is a subset has been around for a lot longer and obviously has had much care and attention lavished on it. The underlying functionality has a settled feel to it, like slipping on an old pair of slippers!

The bugbear of many of these planning systems in the past has been the laborious task of populating them with client data which almost always resides in one or more disparate systems. Truth has clearly understood this is a time-consuming and frustrating issue, and has pre-populated common data, but crucially also provides import and export functions with built-in data mapping tools. This should make the task of moving data into and out of Truth a much simpler job than for competing systems. It’s been apparent to me for a while now that back office software users have been tinkering under the hood with the result that the premise of a communal data integrity has been compromised. That field which carries the label ‘account name’ may well contain the client’s dining preferences in one office, and a ‘don’t mention the war’ note in another office! Any notion that a standard dataset can be extracted from a back office will undoubtedly lead to frustration in future for a growing number of users, so a facility to map custom data from the back office to Truth is a real winner.

Within Truth, the majority of the client-specific data is held within an innovative ‘Items’ area. This bucks the trend of spreading data around rigidly-defined categorised pages (i.e. ‘personal’, ‘assets’, ‘liabilities’ etc.), and really does make a lot more sense. Users can even customise the amount of data within each client record, as there is a very simple mechanism to add/ remove data subsets from a master list. If your client doesn’t have any investments, just delete the whole investment template dataset; if your client has some weird and wonderful estate planning arrangements not covered in the standard template dataset, choose one or more relevant data templates from the ‘Available items’ list and add them in, or invent your own!. There is even the ability to build your own custom client data super-templates (i.e. single person, unmarried couple, married couple). This is simple but clever stuff.

It really is worth spending time making sure ‘Items’ is fully populated, as the rest of the Planning function feeds off it. Because Truth is primarily a cashflow modelling tool, the concept of planning is geared around presenting and manipulating data on net worth, income, expenditure and cashflow; Truth isn’t about stochastically-modelled outcomes, risk-based asset allocation models or sophisticated fund selection. This isn’t a unique approach (PlanLab and DSTiPAS do similar jobs), but I won’t argue with Armson’s observation that for many clients, this will be the first time they will have actually seen a true net worth statement, and it is frequently quite an eye-opener.

What I will take issue with him over is the notion that you could sit down with clients and run Truth in front of them. Yes, the graphics are a powerful way of getting the message across, but Truth’s one genuine fault will get in the way of this: the UI and it’s distracting and ultimately annoying deficiences! Truth is a desktop or server based package, so it shouldn’t suffer from the inherent hinderances of a browser-based UI, but unfortunately, Truth’s UI is just a mess. Whilst the underlying information architecture of Truth is solid, the presentation leaves a lot to be desired. It’s simple and sadly all-too-common stuff in our industry:

• confused and inconsistent design patterns
• poor navigation
• untidy page layouts
• poorly integrated add-on modules (Finametrica risk profiler, VCA database)

It’s blatantly obvious that usability wasn’t a factor in the development of Truth, which really is a shame; with a good usability makeover, Truth would be peerless. Instead, competing systems with relatively inferior functionality will snatch business from Truth because of better UI design (PlanLab springs to mind). Whilst the adviser community is notorious for not being overly concerned with the eye candy (unless it’s blonde), I think that for £197 +VAT per month you should expect a better user experience; sometimes form needs as much TLC as function…

But lets get back to the goodies! On top of the cashflow planning, users have the ability to overlay catastrophic events to simulate what might happen if a client were to die or be disabled. These overlays can be used against the client’s current situation (scenario) or used to further illustrate the benefit of certain recommendations (take out additional protection, and your wife won’t run out of money to feed the kids when you die!). Again, the functions might not be unique, but the simplicity of it’s implementation is gob-smacking! There is also an additional module concerned with Estate Planning which can get as simple or complex as a user might wish. I confess to allowing my attention to wander to take in the magnificent surroundings of Paul Etheridge’s house during this bit of the seminar!

Once you’ve finished playing with the cashflow toys, the Financial Plan report-building area comes into play. This is another brilliantly simple but powerful aspect of Truth. The base Prestwood system is famed for it’s highly intuitive and flexible reporting functionality, and Truth contains the full version. The layout and concept is similar to the ‘Items’ area, with the ability to drag & drop report elements from a standard list to create a plan. The standard list can easily be augmented with custom paragraphs (which have the ability to be context-sensitive) & graphics, and the user can choose between a built-in word processor or exporting out to MSWord.

Audit and archiving functions are comprehensive, and there is also a Meeting Agenda writer and simple Contact Management module included within the package. Licenses for the Finametrica module are an additional cost, but heavily discounted.

With a first-user license cost of a sniff under £200+VAT per month, Truth isn’t the cheapest system available by far, but subsequent licenses come at only £50 per month per user, and the user license is not person-specific. The cost also includes training days and unlimited telephone support.

This relatively high cost may put off some prospective purchasers who either don’t want or understand the power of Truth, but there’s one more trick Armson has up his sleeve which might prove the tipping point, and it can be found here. Expect to see an avalanche of consumer press and clever marketing in the not too distant future! Armson is clearly making a play to drive the adoption of Truth via consumer-led demand, a unique concept in the UK financial planning arena.

I’ve been waiting for someone to make this play for around 18 months, particularly as it has been so successful for some of the US players (Financeware, Ameriprise), and it is no surprise that the marketing-savvy Armson should lead the way in the UK. The commoditisation of the financial planning process itself brings a new USP to the advisers armoury, and one which I firmly believe will be a significant factor over the next few years. We are already seeing polarisation within the stochastic modelling camps with Barrie & Hibbert winning the battle over the actuarially-inferior Distribution Technology and poorly-marketed Tillinghast offerings, and this is arguably led by the perception that B&H have a more robust model and supporting processes: they can be trusted (particularly when over 70% of european insurers use them on an institutional basis). I foresee Truth following a similar line of being marketed as the ‘trusted’ planning tool, supported by an evangelical franchise of Truth-using financial planners.

Strategists at commercial financial planning package providers such as Distribution Technology, PlanLab, & DSTiPAS need to get their thinking caps on: the Truth is dawning, and it’s coming to eat your lunch!

However, potential investors should be aware of the very specific requirements HMRC have set out as to what a hall of residence is.  The criteria have been clarified in August’s pensions newsletter in which HMRC states a “hall of residence” does not need to be owned by the educational establishment whose students are the sole occupants, but in order to be a “hall of residence” it does need to be connected to a particular educational establishment”.  

There are a number of characteristics which assist to indicate in any case whether or not the property in question is a “hall of residence”;

1. An educational establishment identifies the property as one of its halls of residence;
2. The university/college is involved in placing its students in the building;
3. The students occupying the building must all go to the same university/college;
4. The building may be sited on college campus or grounds;
5. The building is not broken up into self-contained apartments with one or more bedrooms, and
6. There are common living areas or eating/cooking facilities or services provided in the building for the use of all occupants

Consideration of these factors should enable a conclusion to be reached whether looking at all this objectively a property is a block of flats or “a hall of residence” for students.  HMRC says: “It is clear from these characteristics that to be a hall of residence it is not sufficient the accommodation is or may only be let to students. Self-contained apartments within a larger building will be residential property in their own right, not one or more halls of residence.”

The accommodation for children in a boarding school will not generally be a hall of residence but will instead fall within the definition of a “home or other institution providing residential accommodation for children” and therefore not residential property for the purposes of the taxable property provisions.

Investing in anything other than “traditional” commercial property funds can be anything but straight forward and advisers should ensure that the HMRC requirements are met before proceeding or risk client’s incurring a possible tax charge.