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17 March 2021

Estate planning is complex. Over the years, we have consulted on many such cases and have seen how the decisions that need to be made can often be difficult and emotional for families.

Acting in this area requires a good understanding of taxation and trust legislation across products, investments and crucially, risk. A high level of compliance oversight is also required to make sure clients’ objectives are fulfilled and they receive the most suitable advice.

With that in mind and from our perspective as compliance consultants, there are five key areas advice teams should consider before any recommendations are made. They are:


  1. Knowledge is power

It sounds obvious, but advisers should never recommend something they don’t fully understand. Working in estate planning requires knowledge that must be kept up-to-date and proof of this education. CPD is essential. There are plenty of courses around and some great provider technical helpdesks. Also, be sure to keep on top of news developments, including any changes to taxation and trust legislation.

Providing advice without being fully conversant on the subject matter is a risky strategy. Likewise, products that are sold the least often could do the most damage to the business, because the seller is less likely to fully informed.


  1. Does the client understand the solution being proposed?

To agree an estate planning solution, advisers need to ensure the client fully understands all of the relevant information, specifically, risk and access. Are they taking on board all the implications of the recommendations? Does this fulfil their objectives and capacity for loss?

Sometimes, discussing the complexities of a product can cloud the basics. For example, we have seen cases where the client had not appreciated that certain aspects of their estate plan would not come into effect until their passing. The rule is simple – if the client doesn’t understand it, don’t sell it.


  1. What is appropriate in terms of attitude to risk and capacity for loss?

It is absolutely crucial to consider a client’s capacity for loss and their ability to absorb losses. This needs even more attention when it comes to high-risk investments.

Including terms and conditions and risk warnings in information, packs is not enough. A thorough assessment and evaluation needs to be discussed with the client and clearly documented. Diligence is essential – there are no shortcuts here.


  1. Have you considered the percentage of total liquid assets?

In the FSA’s days, suitability templates were developed for firms to test their recommendations against its standards. The template for structured products (considered to be high risk) included a question about what percentage of a client’s liquid assets were to be invested. The rule of thumb was that it should be no more than 20%.

The regulator may have changed, but the principle hasn’t. Looking at the percentage of total liquid assets that may be invested is a very useful test for all types of high-risk products. If it is more than 20%, what is the justification? Also, remember that residential property cannot and should not be considered a liquid asset.

It is wise for firms to contact their professional indemnity insurer and discuss this element, as many providers have a very clear view of what they will cover. No one wants to find out they are uninsured against certain cases.


  1. Do you know what all the options are?

There is always more than one possible solution in financial planning and advisers have a responsibility to consider all options available to their clients. It is natural to have a ‘favourite’ solution, but that’s not good enough as a strategy. Ruling out an option because it hasn’t really been evaluated isn’t either. Gifting, life assurance, bare trusts, flexible trusts and investments all need to be considered. Ask questions and speak to technical experts. As with the first point, education is crucial.

For more information about complying with the regulations relating to estate planning, don’t hesitate to contact B-Compliant director, Vicky Pearce, on (0161) 521 8641 or email:

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