A new service aimed at protecting the wealth and future wealth of higher net worth individuals has just been brought out by management consultants KPMG, mainly in response to the increasing desire by such people for independent and professional fee-based advice.
The new Asset Protection Service (APS), says Mr John Crowe, director of the KPMG personal financial services division, isn't very different from what they have always done i.e., assessing a client's financial state and making recommendations. Now they have formalised and streamlined the process and are aiming it not just at new clients, he says, but at existing ones who may have only used their services in the past for a single issue a tax problem, pension provision, etc. Increasing demand for financial overviews from higher net-worthclients who may have known the value of their company's assets and debts down to the last penny, but didn't have a clue about their personal worth or how to protect it means "this is an advice-driven, not product-driven service". The key objectives of most clients with higher incomes, says Mr Crowe, is to maximise after-tax income through a well rounded portfolio of investments, to protect capital from tax, whether capital gains or inheritance taxes, and to ensure that their retirement and their family's financial position is protected through adequate pension provision and life assurance.
The APS service "begins with a questionnaire which we use as a diagnostic resource. The initial meeting should take about an hour to get to grips with their initial position, but we do give the client a checklist of the documents policies, tax and bank statements and such that they need to bring in with them. Once we have the snapshot of the person's financial position and take account of their long-term goals and wishes, we put together a formal review and make recommendations."
The APS considers issues like assets and liabilities in which investments are analysed and are checked against the client's risk profile and expectations. The value of the assets are checked with the fund manager to ensure that they outweigh liabilities. Debt restructuring may be required. CAT and CGT exposure is also reviewed. If there is CGT exposure, it may be worth investigating whether some assets should be disposed of, or transferred, in the form of gifts to lessen the tax liability.
Retirement planning and business protection feature widely in this service says Mr Crowe, since many KPMG clients are business owners or directors. It isn't uncommon, he says, that many existing pension funds "which were often started too late with unclear objectives" have not been reviewed since they were set up. Since the sale of a business "rarely constitutes the `pension' you might reasonably expect, the APS report should show any shortfall that might exist between the maximum target pension and the estimated one based on current funding provisions".
Business and personal protection are the other major issues that the review covers with considerable emphasis on whether your company's on-going success could be compromised if you or any of your partners or principals were to become ill or die. (Life and serious illness insurance values will be checked as well as any key-man type insurances for partners.) On a personal level, the client's own life assurance and pension provisions will also be examined "to ensure adequate credit protection and value for money", says Mr Crowe.
The Asset Protection Service costs approximately £350, and the report is usually with the client within a week, he says.
Financial reviews like these are a good idea for anyone with a business and significant personal assets, if only to set up a proper financial planning environment for the future. Most larger management consultants offer them, usually on a fee basis, as do the bigger broker's practices, though some of those offer them free with the proviso that any products are paid on a commission basis.
Unless all fees and charges are fully disclosed and you fully accept the consequences of paying up-front charges out of early annual fund contributions, you should insist on both the review and arrangement of pension, protection and investment policies be arranged on a nil-commission, agreed fee basis.
For more information about the KPMG Asset Protection Service, contact John Crowe at (01) 708 1750, email: john.crowe.kpmg.ie
