Investment Solutions
Finding the right investment solution is not easy, because there are many competing factors to weigh up.
You have to think of your goals, the risk you can or want to take, the tax position of different investment accounts, whether you want income from your investments, and the very nature of the funds or assets you invest into, for example what is the reward potential?
Combining these various requirements leads to creating an investment strategy, and then a plan.
That, in turn, makes the adviser you use crucial to how well this works.
Trevor Downing IFA are experienced in helping investors develop the investment strategy and plan that provides them with everything they want.
The Investment Strategy and Plan
One key part of investing is that there will probably be quite a few companies involved.
You may need to allocate your invested wealth into various tax wrappers, such as Individual Savings Accounts (ISAs), Pensions (yes, pensions are an investment!), Venture Capital Trusts, and to have underlying “funds” managed by fund managers.
Diversification will be important within any investment portfolio, meaning you are likely to spread your money between different areas with different risk levels.
The sum of all this is that there will be quite a mix of companies, funds and holdings.
That needs co-ordinating and managing (as things change over time).
Again, to optimise your long-term position this requires expertise, as the variance over time between investment returns, that may or may not be achieved, escalates into a sizeable difference.
In other words, managing your investments and aiming to find the optimal return is a skilled exercise. This is what we do, help investors to bring everything together. It starts with your current position, that leads to the strategy and the plan, and from there we implement and manage, as advisers, on an ongoing basis. Working closely with you to get the desired results.
You are expected within the law to take advantage of tax concessions offered to you by HMRC.
Income tax, Capital Gains Tax and Inheritance Tax are three of the UK taxes that we have to pay when we create taxable income, sell items that are liable to Capital Gains Tax and when we die. There are valuable tax concessions available to reduce these taxes and a wide range of opportunities available which we will highlight to you.
Investment Videos
We have four videos that provide you with more detail on investing, covering asset allocation/diversification, investing for income, rebalancing and savings.
Use the link below to go to our video library and see the titles.
Our Independent Financial Advisers are here to talk you through the various investment options that may be appropriate for you. Please feel free to get in touch here or email us at enquiries@downingfm.co.uk
More on Investment Solutions
Unit Trusts / Open Ended Investment Companies - OEICs
Unit Trusts and OEICs are common types of collective investment.
They are large funds of monies and / or investments pooled together and controlled by trustees with the aim of gaining capital appreciation, income, or both. They invest in a wide range of assets and / or other funds.
There is no limit to how much you can invest in these collective investment vehicles. They are open ended investments as they can continue to accept further investments and issue more units / shares.
We are able to structure investments so that they can be used to top-up your Individual Savings Accounts (ISAs) each tax year (funds in the Unit Trust permitting). At the same time, we can make judicious use of your Capital Gains Tax Annual Exempt Amount (£12,300 in the 2021 / 2022 tax year) in realising assets to fund your ISA from your Unit Trust.
Investment Trusts
Similar to Unit Trusts and Open-Ended Investment Company (OEIC), Investment Trusts are a form of pooled investment. The difference is that an Investment Trust is a public company and as such, you become a shareholder when you invest. They are closed-ended and the shares are traded on the Stock Exchange.
Like Unit Trusts / Open-Ended Investment Company (OEIC), they pool investors’ money together to invest in a broad range of assets or other funds with the aim of achieving capital growth or income, or both.
Investment Bonds (Onshore & Offshore)
The concept of the UK Investment Bond or the International Investment Bond has been available in the UK for over 50 years. It is possible to acquire the latter of these products in most major countries in Europe as well.
It is hardly surprising that this particular tax-planning product is in great demand for both small investments and for people investing substantial funds of money. Many say: “it seems almost too good to be true.”
Investment Bonds provide ideal vehicles for not only potential capital growth, but they can also be used to provide a tax deferred income stream as they have the facility to withdraw up to 5% of the original capital each year (including the cost of advice) without creating any immediate Income Tax liability.
Investment Bonds are written as a series of identical contracts (known as clusters) to allow greater flexibility and tax efficiency, in particular in the future should large withdrawals be required.
International Investment Bonds
International Investment Bonds are non-income-producing assets, so there are no annual tax returns for you to complete.
Withdrawals up to 5% of the amount invested (including charges that relate to the cost of our advice) may be taken each year, without any immediate income tax liability (subject to a maximum of 100% return of capital). The tax deferred allowance facilitates the payment of a tax-efficient “income” by way of capital withdrawals.
International Investment Bonds build up free of tax on income except certain withholding tax and are free of Capital Gains Tax. Income tax would only be due should an event happen which is referred to as a Chargeable Event. A Chargeable Event includes the death of all lives assured, partial encashments in excess of 4% cumulative allowance or full encashment.
Underlying funds can be switched generally free of charge without giving rise to Capital Gains Tax or Income Tax liability and with no reporting requirements.
International Investment Bonds are not subject to Capital Gains Tax on encashment.
International Investment Bonds are classified as Life Assurance Plans by HMRC and thus, are written with lives assured. Using younger lives assured can build longevity to the arrangement and avoid a Chargeable Event for tax purposes on the owners’ death. This flexibility gives the Executors the opportunity to distribute the Estate in accordance with the Will (either to individual beneficiaries or to a Trust and provides the flexibility to decide when to encash the investment and indeed in whose name in order to control any tax payable).
Investment Bonds can be held on-shore (Investment Bond) or off-shore (an International Investment Bond) typically, the ultimate decision as to the most appropriate version will depend on your tax status and those who may ultimately encash the Bond – and thus be assessed for any tax and are the likely term of the investment. As the investment is for the long term, we believe the International Investment Bond is most appropriate as you are building up funds entirely free of tax compared to a UK Investment Bond where the fund does suffer Income Tax and Capital Gains Tax at a rate of up to 20%. Again, we can explore this further when we meet you and gain an understanding of your needs. We believe the International Investment Bond will be structured to provide greater flexibility should income and/or larger withdrawals be needed in the future.
Discretionary Fund Management (DFM)
Many providers offer the option to manage portfolios on your behalf. Discretionary Fund Management is when an investment professional known as a Discretionary Fund Manager (DFM) builds and manages a portfolio of investments on your behalf. They take into account how much you have to invest, the level of risk you are prepared to take, your financial goals, and your tax position.
The aim is to build bespoke solutions that are tailored to each individuals’ specific needs and aspirations. For this reason, the investment manager has the autonomy to manage your portfolios as he or she deems appropriate, within the parameters of your investment objectives and risk classification.
We choose providers without ties to fund managers, banks or insurance companies, to deliver an investment management service that is impartial. This tailored service gives you access to a broad scope of investment assets. These range from equities and bonds to investment funds and hedge funds, underpinned by the added benefit of institutional teams.
Managed Portfolio Service
Managing an investment portfolio is a complex challenge, requiring continuous monitoring and research. A Managed Portfolio Service (MPS) is designed to address these issues and to provide high-quality investment management for your portfolios.
A managed portfolio service could be viewed as a halfway house between full Discretionary Fund Management and a stand-alone multi-asset fund such as a unit trust or Open-Ended Investment Company (OEIC).
We can provide you with an investment solution that closely matches your goals, ambitions and attitude to risk. This allows us to deliver outstanding value at an accessible, cost-effective level. You can be sure your money will be diversified across a wide selection of different investments that are reviewed and rebalanced regularly to ensure they continue to match their risk appetite and investment goals.
Capital Gains Tax (CGT)
For 2021/2022, individuals are entitled to an annual CGT exemption of £12,300 and trustees up to £6,150.
If you think that your investments have made substantial unrealised gains and you have not yet made use of your CGT exemption, you should consider taking financial advice. You could for example, consider reinvestment in an ISA (subject to the ISA limits), reinvestment by a spouse/civil partner or reinvestment into a similar holding. Please contact us for more information.
Consideration should be given to transferring assets between spouses and civil partners before encashment to enable each to use their annual exempt amount – this requires a genuine and unconditional gift from one spouse to another. Such an unconditional transfer of assets between spouses / civil partners will not give rise to a Capital Gains Tax liability.
It is important to consider whether any investments have made a loss and whether excess gains could be offset by any losses. Losses can be carried forward indefinitely, so it is important to include gains, losses and the annual exemption in any calculation to determine how to maximise relief.
Our Partnership with Vanguard
We’re proud to offer access to Vanguard’s LifeStrategy® model portfolios — globally diversified, low-cost, and professionally managed solutions designed to align with your long-term goals.
Learn more about how we help you invest with confidence