What’s in a name (or initials)?
When Chancellor Financial Management Limited (CFM) published its Vision Statement early in 2019, we confirmed that, wherever possible, we pride ourselves on using plain language – respecting that our clients may not be familiar with the financial services industry’s jargon and terminology.
The financial services industry is awash with acronyms and within our offices it is difficult not to use these on a day-to-day basis. Sometimes though, through force of habit, it is tempting for us to use them whilst speaking to clients. As our Vision Statement says, we endeavour where possible not to do this, so, in this article we will have a (hopefully) fun flip through some of the acronyms that we use in here daily.
The backbone of the Chancellor advisory business are bespoke pension schemes such as SSAS (Small Self-Administered Schemes) and SIPPs (Self-Invested Personal Pension Plans). Since pension simplification legislation was introduced in 2006, the differences between these two types of arrangements have narrowed, but both give clients the flexibility to choose an investment strategy, (within the legislative framework) to suit their own circumstances and requirements. For example, both arrangements can acquire commercial premises as an investment which can then be occupied by the client themselves as a Tenant – or let out to a third party. As well as commercial property, both types of arrangement allow a wide range of investment options including company shares, fixed interest securities, cash, collective investments, managed funds and Trustee Investment Plans (TIPs). One major difference between the two types of arrangements is that a SSAS can allow a loan-back to be made to the employer’s business as an alternative to borrowing money from a commercial bank. The legislation allowing SSASs was enacted back in 1978 so these schemes are no flash in the pan and the Chancellor team have a long and enviable track record in working with them.
As IFAs (Independent Financial Advisers), Chancellor are authorised and regulated by the Financial Conduct Authority (FCA) and have no ties to any one product provider but look at the whole of the market when recommending solutions to our clients. In recent times there has been a trend towards advisers who are “restricted”, so if a client is looking for a truly independent adviser then we will be happy to have an initial discussion with them. One of Chancellor’s strengths is that as well as holding Corporate Chartered status from our professional body the CII (The Chartered Insurance Institute), each of Chancellor’s Chartered Financial Planners hold the coveted FPFS (Fellow of the Personal Finance Society) status, which is the highest honour that the professional body bestow.
When analysing a client’s existing pension arrangements one of the “safeguarded benefits” that we look for in the plans is that of Guaranteed Annuity Rates (GARs). Where a plan does include these, it can mean that a client can obtain a much higher annuity rate at which to buy their retirement income than exercising an Open Market Option (OMO) where Chancellor are able to use their status as Independent Financial Advisers to find the highest annuity rate in the open market. In recent times due to low interest rates impacting on the annuity rates that are available, many clients have opted for Flexi-Access Drawdown (FAD) which in some cases allows more flexibility and better death benefits than annuity purchase. Saying that, Flexi-Access Drawdown is not suitable for everyone as it involves ongoing risk and charges so if anyone is contemplating going down this route, it is vital that they take individual regulated advice. When looking at the underlying investment portfolios within a Flexi-Access Drawdown arrangement Chancellor do look at the AMCs (Annual Management Charges) and the OCFs (Ongoing Charge Figures) of the various underlying investment funds.
Away from a pensions environment we do advise on tax efficient investments and one of the first ports of call for many investors are those of ISAs (Individual Savings Accounts). The two main types are cash or stocks and shares versions (where again the AMCs and OCFs are relevant!)
Due to the nature of Chancellor’s client base we are often called upon to give advice on Inheritance Tax matters (IHT). At the date of writing this article, the current rate of Inheritance Tax is 40% but there are several ways to reduce or mitigate an individual or couple’s inheritance tax liability meaning that a higher proportion of their wealth can be passed down to their families in the event of their deaths. Please do however bear in mind that IHT planning is not regulated by the FCA!
We have only touched on a small proportion of the acronyms that are in place in our industry but hopefully this article has given an insight of the type of work we do for our new and existing clients.