NEWS & VIEWS
With tax-free personal allowances shrinking and more investors being pulled into the capital gains tax net in the UK, financial advisers are under more pressure to provide their clients with tax-efficient planning and accurate tax reporting.
Against this backdrop, it’s no surprise that over a quarter of financial advisers view CGT scenario planning tools as an absolutely ‘must-have’ platform feature and find it is influencing the providers they’re choosing to work with.
Many platforms are likely to have some basic tools in place to help with CGT, but it’s increasingly apparent that advisers need more sophisticated solutions to help ensure clients make the right investment choices and maximise any allowances.
CGiX’s What If Function makes tax-efficient planning easy. This comprehensive CGT scenario planning tool supports advisers in assessing the capital gains tax impact of potential sales based on their client’s current portfolio and CGT position. The tool also allows advisers to generate a summary of the scenarios they’ve run so they can provide an easy-to-understand report for their clients.
Below, we highlight five common challenges faced by financial advisers and explore how CGiX’s What If Function can make things easier.
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#01: Targeting certain gains
One of the most common challenges faced by a financial adviser is when they are asked by a client to realise a certain gain amount. Whether that’s minimising or maximising the capital gains of sales or targeting a specific gain amount, this can be a time-consuming and complicated activity for advisers.
Our What If Function can help advisers realise target gains using a variety of tax-efficient strategies. It can target a specific gain while releasing the largest amount of proceeds for the client; dispose of securities that will cause the smallest reduction to their holdings or dispose of securities that were most recently acquired by the client.
CGiX’s What If Function can also ensure that a minimum value of shares are retained for each of the holdings in a given portfolio. As well as options to allow advisers to determine whether disposals can lead to losses or whether disposals can be made across multiple holdings.
#02: Making the most of tax-free allowances
With the annual exemption amount for CGT having fallen from £12,300 to £3,000 in just three years, investors are keener than ever to maximise every penny of their tax-free allowances. CGiX’s What If Function helps financial advisers utilise their clients’ allowances in the most tax-efficient ways in the run up to tax year-end.
The tool allows users to see which of their clients haven’t used their annual exemption amount in full and identify which of their investments could be sold to maximise the allowance effectively.
CGiX can also support financial advisers in identifying whether one of their clients could benefit from transferring assets to their spouse to maximise their partner’s allowance ahead of the tax year-end.
Advisers can also use our What If Function to assess the most tax-efficient way of realising £20,000 to fund an ISA allowance, if clients haven’t done so already.
#03: Raising certain proceeds
CGiX’s What If Function is perfect should a financial adviser wish to target specific sale proceeds for a client, no matter what time of year.
Just as with our target gains functionality, our market-leading CGT scenario planning tool will aim to get as close to the target proceed amount as possible, considering the constraints of the portfolio, using a variety of different options.
It can target a specific proceed while disposing of securities that will cause the smallest reduction to their holdings; dispose of securities that were most recently acquired by the client or dispose of securities in a way that will produce the least amount of gain or loss.
Targeting specific proceeds while excluding certain assets
Sometimes investors have assets they just don’t want to part with. Maybe it’s shares in a beloved sports team or a family favourite brand, no matter peak or trough they have no desire to see it leave their portfolio.
These quirks of a client’s portfolio can make devising tax-efficient strategies a challenge. Our What If Function allows advisers the option to exclude certain assets when running potential scenarios for their clients, meaning they don’t have to worry about accidentally including Mr Smith’s prized Manchester United shares in their suggested strategies.
CGiX’s What If Function also allows advisers to set up warnings for clients with these kinds of cherished assets. This ensures our software is set up in a way that works best for both adviser and client, while ensuring investment strategies and advice remains tax efficient and accurate.
#04: Changing investment strategies
At Financial Software Ltd, we understand that financial advisers can be juggling many different portfolios with active investment strategies that require close monitoring and swift adaptability to changing market conditions.
Our What If Function supports financial advisers’ ability to assess the impact of divesting from a particular asset due to a change in strategy. Whether advisers need to liquidate holdings based on sector, geography or industry, our comprehensive CGT scenario planning tool will assess the impact of divestment across a complete set of client portfolios.
The tool will also help advisers assess the impact of changing corporate actions, such as cash takeovers or lapsed rights, and respond quickly and appropriately to its impact on their affected clients’ portfolios.
#05: Effectively handling volatile assets
Unlike many other CGT scenario planning tools on the market, CGiX takes into consideration the full breadth and complexity of CGT rules in the UK when running scenarios provided by advisers
One challenging area of CGT legislation that often comes up when devising tax-efficient strategies for clients at tax year-end are share matching rules. Our market leading What If Function supports financial advisers in assessing the impact of rebuying assets around or at the end of the tax year.
Additionally, the tool can assess the impact of repurchases for disposals that have already been made but remain within the 30-day share matching period. This allows advisers and their clients to assess the best strategies for them without accidentally falling foul of tricky tax rules.