Business Builder Forum 11th May 2011 Welcome Paul Meades – Meades & Company
Morning agenda07.45 Arrival08.00 Registration, breakfast and networking08.20 Welcome: Paul Meades, Meades & Company08.30 John Boss, De Montfort Professional Wealth Management09.30 Q & A09.45 Close and networking10.00 Stadium tour with former Watford FC player Neil Price
Agenda• How to improve your personal wealth• Planning• The effect of costs and charges• The effect of tax• Beware of cash• Beware of Buy to lets• Reduce costs wherever possible• Minimise risk• Diversify your portfolio• Engage with your finances
The De Montfort Companies De MontfortDe Montfort De Montfort De Montfort De MontfortProfessional Alternative Financial Tax Wealth Investments Advisers SolutionsManagement
PlanningFirstly you need to discover what you are aiming for?
Planning• Set out where you want to go• When you want to get there• What you want to do along the way• We cannot suggest any investments before we know what is required of them!• Allow your adviser to get to know your circumstances and listen to what you want, as opposed to what they want you to hear
Minimise costs and charges• Be aware of what the total costs and charges are • Transparent terms of engagement• Know your total expense ratios • Difficult to find with some providers• Independent Research Tools • Offered to all De Montfort clients
Minimise Costs and Charges• Typical situation• £100,000 investment Jupiter Merlin Balanced Portfolio Acc• Bid/Offer Spread 5.25%• Annual Management Charges 1.5%• Total Expense Ratio 2.44%• £100,000 investment Jupiter Merlin Balanced Portfolio Acc• Bid/Offer Spread 5.25%• Annual Management Charges 0.75%• Total Expense Ratio 1.69%• Physical cost saving per annum £750• Over 10 years £7,500
Minimise Costs and Charges• Other example• £100,000 investment Discretionary Fund Manager• Annual Management Charges 1.50%• £100,000 investment Discretionary Fund Manager• Annual Management Charges 0.35%• Physical cost saving per annum £1150• Over 10 years £11,500
The effect of TaxSorry George, our clients do not like paying tax
The effect of tax• Use all tax allowances and tax efficient investments available• ISA’s £10,850• Pensions £50,000 (£200,000 this tax year)• Onshore Bonds No Limit – 5% tax deferred withdrawl facility• Offshore Bonds No Limit – 5% tax deferred withdrawl facility, gross roll up• Other Investments Use capital gains allowances each year £10,600• Offshore Savings Gross roll up• Enterprise Investment Schemes• Venture Capital Trusts• Property partnerships
Venture Capital TrustsVCTs are investment companies listed on the London Stock Exchangeand were introduced by the UK government in 1995 to encourage individualsto invest in smaller UK companies not listed on the main stock exchange.VCTs invest in a portfolio of unlisted or AIM companies (or both) in order toaid their development into a successful business and realise gains for investors.They are designed to give private investors an opportunity to back young growthcompanies while offering generous tax incentives.Investment Limit £200,000 per annumIncome Tax Relief30%Hold period 5 yearsOther benefits tax-free dividends tax-free gains
Enterprise Investment SchemesAn Enterprise Investment Scheme (EIS) is a government initiative designed toencourage individuals to invest in Britains smaller private companies. Toachieve this, the Government offers EIS investors a range of tax reliefs.The tax advantages available from an EIS investment provide investors with asignificant head start in comparison to more traditional investment products.They’re particularly suited to investors with income tax liabilities, or those withcapital gains to defer.Investment Limit £500,000 per annumIncome Tax Relief30%Inheritance Tax Relief 100% after 2 yearsHold period 3 yearsOther benefits tax-free growth
Property PartnershipExampleSpringfield UK Commercial Property FundThe Springfield Commercial Fund expects to return in excess of 13% p.a. viathree reliable benefits of Focused Funds:• above-average rental income• above-average capital value increases, and• risk reduction through high quality management and meaningful diversification.The Fund’s closed-ended structure enables investors to benefit from buying intothe commercial property market at this point in the market cycle and avoiddilution from “herd investment” in later years.The Fund’s management team is expert in commercial property and highlyexperienced; it is committed to providing investors with above average returnsfor below average risk.
Property PartnershipExampleSpringfield UK Commercial Property FundOption 1 – 50% Geared versionMinimum investment £20,000Expected return 13% per annum, including 5% income during the termExpected capital allowances of between 30% and 40% (not guaranteed)Option 2 – 75% Geared versionMinimum investment £125,000Expected return between 18% and 20% per annum, no income paid during theterm.Expected capital allowances of between 60% and 80% (not guaranteed)Early investment incentives of up to 8%
PensionsMake your existing pension monies work harder.Funds over £50,000 consider Self-Invested Pension Scheme A SIPP is a personal pension wrapper that offers individuals more freedom of choice than conventional personal pensions. They allow investors to choose their own investments or appoint an investment manager to look after the portfolio on their behalf. Individuals have to appoint a trustee to oversee the operation of the SIPP, but having done that the individual can effectively run the pension fund on his or her own.A fully fledged SIPP can accommodate a wide range of investments under itsumbrella, including shares, bonds, cash, commercial property, hedge funds andprivate equity.Don’t forget Protected Rights monies.
Beware of CashExample3.5% Fixed 1 Year Bond, minimum investment £1,0002.8% approximate yield after tax at basic rate of 20% (2.1% net for 40%taxpayer, 1.75% net for 50% taxpayer)5.3% Current Retails Prices Index (as at 5th May 2011)-2.5% net return after basic rate taxHowever CASH CAN BE KING!
Beware of CashAlternative6.25% fixed income with prospect of 0.5% bonus, 5 year term, full capitalprotection as long as the FTSE has not fallen by more than 50% during the termComing soon5 counterparty structure with up to £425,000 full protected by the InvestorCompensation Scheme. Only available through De Montfort
Beware of Buy to lets• What are you intending for this type of investment to do?• Income?• Growth?• Property Spreadsheet
Beware of Buy to lets• Prospects for Growth?• Average House Prices Jan 1991 to Jan 2011• Jan 1991 £53,052 to Jan 1996 £50,521 -4.77%• Jan 1996 £50,521 to Jan 2001 £83,450 +65.18%• Jan 2001 £83,450 to Jan 2006 £158478 +89.91%• Jan 2006 £158,478 to Jan 2011 £161,211 +1.72%• Next 5 years?
Beware of Buy to lets• QNUPS – Qualifying Non-UK Pension Schemes• What Are The Benefits?• Tax-free growth –no CGT or Income tax• Tax efficiency on income –minimal UK income tax• No limits on annual or lifetime limits*• Investment flexibility –e.g. property• Cash or in-specie assets• Immediate IHT mitigation• Corporate contributions• Portable
Reduce Costs Wherever PossibleInsurance Premiums – Life Cover, Shareholder Protection, Key Man, Income Protection, Private Medical, General InsurancesBills – Company utility billsBorrowing – Corporate debt, personal debt, mortgages
Relevant Life PoliciesCorporation Tax can now be legitimately claimed on life assurance contributionsZurich relevant life calculator
Minimise Risk Risk TargetsProfiler Succession Volatility % Return % pa Maximum Portfolio Loss 1 1 2 to 4.75 3 to 4.5 -3 to -5 2 2 4 to 7 4.5 to 6 -2 to -8 3 3 5 to 9 5.2 to 7.5 -5 to -12 4 4 8 to 13 6 to 8 -7 to -15 5 5 10 to 16 7 to 10 -12 to -18
Diversify your portfolioUse investments that are uncorrelated to the equity marketsTry to seek some solutions that do not work on a benchmark basisKnow your maximum downsideWords of cautionIf returns offered are very high, then the risk is usually high
Diversify your portfolioExamples:The Protected Capital Currency Fund 5 Year investment term 100% capital protection via a zero coupon bond Target returns 12% per annumLife Settlements Asset backed investment Long established market Number of different providers Returns around 9% per annumVineyard Investment 3 Year investment term Asset backed investment Fixed returns between 30% and 39%
Engage with your financesTake the time to review and monitor investments on a regular basisKeep in touch with the latest financial newsUse effective technology Apps Online website Wrap
Client Website• Access 24hrs a day 365 days a year• Real time valuations• Secure communication• Security Equivalent to Banks• Personal document storage• Client / Adviser interaction
WRAP ISA’s PEP’sUNIT TRUSTS CASH CLIENT BANK ACCOUNT ACCOUNT ONSHORE BONDS OFFSHORE BONDS SIPP DeMontfort Professional Wealth Management
Why WRAP?• INDEPENDENCE• FULL SUITE OF TAX WRAPPERS• MODEL PORTFOLIOS (VESTRA, EVERCORE, QUILTERS)• ‘WHOLE OF MARKET’ INVESTMENT PROPOSITION• TRANSPARENT CHARGING STRUCTURE• HIGHLY COMPETITIVE TERMS WITH FUND MANAGERS• SECURITY OF CASH – SPREAD ACROSS 8 BANKS
De Montfort Professional Wealth Management is authorised and regulated by the Financial Services Authority