Download For clients - Nucleus financial

Nucleus User Sessions
October 2010
Agenda
Nucleus proposition
• Operational update
• New developments
• Model portfolio enhancements
• Discretionary fund management
• Understanding Nucleus account types
Break
Nucleus best practice
• Model portfolios
• Transfer and re-registrations
• Reports, Alerts and Tools
• The new business process
Finish
Session 1 – Nucleus proposition
Nucleus proposition
IFA
platform
1.
Client
platform
Analytical and support tools
2.
General
Isa
Pension
Onshore Offshore
bond
bond
Assets
3.
Cash
Mutual funds
Equities
Gilts
Bonds
ETFs / other
•
•
•
•
•
Transparent
IFA control
Open architecture
Cost effective
Clear charging
structure
• Wide range of tax
wrappers
New developments
New developments
•
•
•
•
•
•
•
•
•
•
Client platform
Funds research
Jira enhancements
Reports
Discretionary fund management
Regular payments
Portfolio reviews
USP / ASP info
Client statements
Model portfolio enhancements
Client platform
• Transaction
history (opt out)
• IFA branding
• Memo assets
• Correspondence
• Client reports
(opt out)
Fund research
• Screener across Nucleus
fund universe
• Search across multiple
criteria
• Easy access to fund
factsheets, fund charges,
charts
• Sort by:
• Prices
• Performance
• Ratings
• Charges
Client statements
• Transaction summary
–
–
–
–
Payments in
Withdrawals out
Income
Fees & charges
• Model portfolio info
• Easier to read
transactions
• Large print format
available
• 3 main sections:
– Summary
– Holdings
– Transactions
• On platform: 28th October
• User guidance available
Jira enhancements
• Only enter data specific to
query
• Resolution dates for requests
• Separation into following
categories:
– Instructions
– Notifications
– Issues
Due: November
Reports
• Download specific to advisers & firms / local
offices
• Improved date search
• Quicker to download complex report e.g.
Outstanding trades
Regular payments – asset allocation
• When updating model
portfolio can also
update asset allocation
for regular payments
• Checkbox enables you
to select whether
regular payment asset
allocation should also
be updated
• Provides flexible
mechanism to update
lump sum, regular
contribution and
rebalancing asset
Portfolio review
• Shows
performance
across any time
periods
• Can be used to
show valuations
on a specific day
USP/ASP account information
•
•
•
•
•
GAD limits
Income amounts
Payslips
Review dates
Tax codes
Corporate actions
• Correct transaction types to appear on
transaction history
• Corporate action types for:
– Equities
– Collectives
– Bonds
• Improved correspondence to IFAs
Corporate actions
Unit trusts / OEICS
Merger
De-merger
Closure
Equities
Bonus issue
Subscription
Consolidation
Rights issue
Subdivisions
Compulsory call payments
Scrip dividends
Optional call payments
Acquisition
Resale
Share capital reduction
Closed offer
Bonds
Name change
Optional redemption
Optional conversion
Two funds merge to create single fund
One fund is split and units in new company issues to investors
Fund is closed to new business
Issue of further shares to shareholders without payment
Shareholder has right to subscribe for shares of different share class
Issuer decreases number of shares in issue
Existing shareholders have right to subscribe for further shares
Number of shares is increased by reducing nominal value of shares
New shares issues and holders required to make further payments
Shareholder opts to receive further shares instead of cash dividend
Shareholder elects to make a call payment to subscribe to new issue
2 companies merge into 1 to make new company
Where group of shareholders are invited prior to offer with subscription
as part of return of capital to shareholders
Selected group of investors are invited to purchase shares
Name of a bond changes
Holders of a bond can redeem their holding without any payment
Holders can covert their bond into shares without any payment
Model portfolio enhancements
• Self-service model portfolios
• Bulk rebalancing
• Exclude cash from rebalance
Due: December
Self-service model portfolios
• Ability to add / edit new and existing model
portfolios
• Single model portfolio used across multiple
account types
• Modify model portfolios for new client subgroups
1. Select model portfolio
2. View model portfolio
3. Add / edit model portfolio
4. Confirm product availability
5. Confirm MP profile updates
New business enhancements
New workflow making it easier to add new
business
• Multi-client, multi-account
• Enables joint accounts to be processed online
• Removes need to send in application paperwork
• Integrates illustration and new business
processes
• Pre-population of forms
• Signatureless direct debit mandates
IFA usability testing currently underway
Illustrations enhancements
• Integrated into new business process
• Consistency across all pre sales, post sale and pension review
illustrations
• Illustration will incorporate existing account value/data for top-ups or
for moving to USP
• Growth rates used based on fund selection
• Quick quote or full illustration
• Fees in % or monetary amount / Multiple regular contributions
• Can do illustrations for joint accounts, lump sum and regular
contributions.
• Save and retrieve illustrations / Copy illustrations
• Download & print multiple illustrations
Automated sell-downs
• Automatically sell down if <1% cash in account
• Sell down in last week of each month, in order to
pay monthly fees
• Sell down will:
– Sell across assets held in proportion to their holding
– Sell in order to create 2% cash in accounts
– Flagged assets will not be sold
• Accounts with too little cash will be escalated to
Nucleus
• ‘Pending transactions’ will stop sell-downs
Gross general account
• Gross interest on distributions on cash
• Applicable for:
– Non-doms
– Corporates / trusts
– Third party products
• Have had difficulties obtaining gross
distributions from fund managers
• Provide update later in year
Recent changes
• Apply fees
– Account search
– Calculate % fee amount (as well a £ value)
• Alerts
– Cash balance above 5%
– Tax relief paid
•
•
•
•
Client search list –alphabetical order
Fees tab – admin fees now shown
Payments tab – now has filtering
Export transactions
Other upcoming changes
• Bulk switching – will analyse existing fund status before switching in
order to eliminate rejections
• Correspondence – USP Annual illustrations
• Equity / ETF trading – better disaggregation of units
• Back-office systems – Intelliflo
• Links to Financial Express
• ‘Print all’ accounts
• Gross general account
Understanding Nucleus account types
Wrap contributions by account type
Pensions - the market
•
By far the largest accessible market for advisers
– Not recession proof but sales holding up better than other markets
– Mainly transfer business so investors not required to sign a cheque
– Gradual unwinding of occupational schemes continues to release money into this
market
– Personal pensions legacy books a soft target
– Main players are Standard Life, Skandia, AEGON, Scottish Widows and AVIVA –
nearly 2/3rd of the market.
•
More than £3.1bn (APE) placed into personal pension market in 2009.
– This is an annualised total to reflect effect of regulars
– Means that singles and transfers (most of the total) are in fact reported at 1/10th
their monetary value. FUM accessible is therefore much bigger than this.
•
More than £270m (APE) or £2.7bn into Income Drawdown in 2009
– Surge in Q1 ahead of age change rules
– Doubled normal run rates
– Main players are Standard Life, Prudential, Winterthur, Scottish Widows
Key Benefits
•
Open to all UK residents, including non-earners
•
Highly tax efficient
•
Open to very wide range of investments
•
Investment flexibility – shape around evolving requirements and risk tolerance
•
Flexibility on what and when to take as benefits
•
Risk management flexibility as benefits are taken
•
Lifestyle flexibility - stay working, supplement earnings
•
Security - trust based instead of insured basis
Going forward will provide materials on how to make most of pension options
Nucleus pension pots
Pension (Sipp)
Pension
(non-protected rights)
Pension
(protected rights)
Appropriate
Personal Pension
Accumulation
Accumulation
Accumulation
Benefits and
Income *
Benefits and
Income *
Benefits and
Income
* USP (can convert to ASP) / Income drawdown
Onshore bonds - the market
• More than £12bn placed in 2009
– Down on 2008 but some evidence of trending back up in late 2009 and
early 2010, particularly unit linked
• Main players are Skandia, Prudential (particularly with-profits),
Scottish Widows, AVIVA and L&G who together control over half the
market
Onshore Bonds – Key Benefits
•
No CGT liability to the investor – due to ‘life funds’. Growth is subject to income tax
rules for end investor but not necessarily payable when it’s released
•
Tax planning - liability to investor only arises at encashment
•
Retirement planning - defer encashment until in lower rate tax bracket
•
Inheritance tax planning - can assign under trust
•
Very flexible - fund switches free of charge and tax
•
Nucleus feature – daily calculation of tax due - benefit increases with fund growth
and term
Going forward will provide materials on how to use onshore bonds within a portfolio,
including technical support including for trusts
Onshore bond tax account
• Tax account
– Appears as ‘asset’ within account valuation
– Calculated on daily basis to represent tax
deductions
Onshore bond tax account
• Tax account
– Purpose is to show effect of tax deductions on full
encashment
– Determined on asset gain (ignoring UK equity based
dividends)
– Allowance for indexation (Consumer Price Index)
– Tax rate of 20%
– For example:
•
•
•
•
•
Investment of £100K rises to £110K after 1 year
50% of assets in equity based uk funds, CPI increase is 2%
Tax account value shows: 10K * 0.98 * 0.5 * 0.2 = £980
Tax account would show -£980
Calculated daily – cumulative balance shown
Onshore bond tax relief
• Tax relief payable on initial adviser fees, as is classed as part of
taxable business of life assurance company
• Reduces amount payable to client by 20%
• For example:
– 3% initial fee
• 3% * 0.8 = 2.4% is paid by client
• 0.6% is claimed back as tax relief
• 2.4% is deducted from client account
• Ignore this for purposes of new business application (e.g. Still put
3% as fee – tax relief works ‘behind the scenes’)
• Illustration
– Keyed at 3% initial adviser fee
– Illustration will show 2.4% in initial adviser charges (reducing
RIY)
– Monetary amount of initial adviser fee will be equivalent to 3%
Offshore bonds - the market
• Nearly £5bn placed in 2009 with some trending upwards towards
the end of 2009/start 2010
• Main players are AXA, Skandia, Canada Life and Scottish Widows
who together make up over half the market
Offshore Bonds – Key Benefits
• A ‘life’ contract issued by a non UK life assurance
• Benefits from ‘gross’ roll up outside the UK tax system
• Normally able to access a wider range of asset types than onshore
bonds
• Tax planning
• Retirement planning
• Trusts
– Manage disposal of assets and protect from inheritance tax
– Considerable strength and expertise from the RL360 relationship
– Work through Nucleus to get the best from this resource
Isas – the market
• Increase in the annual allowance from £7,200 to £10,200 has helped
drive an considerable increase in ISA sales over the past few
quarters
• Investment Management Association expects 2010 to be the
strongest year since they were launched
• Total net sales in the year to the end of Q2 2010 were £4.8bn
compared to £0.9bn for the previous year
• A total of £96.7bn is currently invested in equity based ISAs
ISAs – Key Benefits
• Tax Efficient
– Especially for high rate tax payers or potentially exposed to CGT
• Flexible
– Open to a very wide range of asset types
– Can be used for a range of planning scenarios including retirement
• Accessible
– Assets can be released at any time with no chargeable gain or tax
exposure
• Cumulative
– £10,200 per annum can add up !
• Underused ?
– Full ISA allowance ought to be used before considering anything else
Nucleus platform assets
Cash accounts
• RBS – bank account associated with accounts
– 1.25% Instant access
• SWB – treated as an asset
– 1.75% General
– 2%
Pension
• Other cash accounts becoming available
Funds report
Fund manager
Full fund name
Isin
CITI code MEX code Sector name
AEGON Asset Management UK
AEGON Active Value Property B Acc
GB00B3MZST88
IOF3
None
UT UK Direct Property
AEGON Asset Management UK
AEGON American Equity A GBP
GB0007451858
SN04
SEAME
UT North America
AEGON Asset Management UK
AEGON American Equity B GBP
GB0007450553
SN50
SEAMB
UT North America
AEGON Asset Management UK
AEGON Ethical Cautious Mgd A Acc
GB00B1N9DX45
O982
SEECM
UT Cautious Managed
AEGON Asset Management UK
AEGON Ethical Cautious Mgd A Inc
GB00B1N9DW38
O981
SECEM
UT Cautious Managed
AEGON Asset Management UK
AEGON Ethical Corporate Bond A Acc
GB0005342646
SN83
SESRA
UT Sterling Corporate Bond
AEGON Asset Management UK
AEGON Ethical Corporate Bond A Inc
GB0005342422
SN84
SESRI
UT Sterling Corporate Bond
AEGON Asset Management UK
AEGON Ethical Corporate Bond B Acc
GB00B018K352
ZH97
SESRB
UT Sterling Corporate Bond
AEGON Asset Management UK
AEGON Ethical Corporate Bond B Inc
GB00B0C4RP31
US88
SEBII
UT Sterling Corporate Bond
AEGON Asset Management UK
AEGON Ethical Equity A
GB0007452484
SN13
SEETHA
UT UK All Companies
Standard initial charge
Nucleus initial charge Standard AMC AMC Rebate Min trade value Settlement period (t+)
Flagged Asset
0.00
5.50
0.00
5.50
5.50
4.50
4.50
0.00
0.00
5.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
None
None
None
None
None
None
None
None
None
None
0.50
1.25
0.75
1.25
1.25
1.00
1.00
0.50
0.50
1.50
0.00
0.50
0.00
0.50
0.50
0.50
0.50
0.00
0.00
0.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
Adding TERs
to fund
charges
Lists for unit trusts / OEICs, ITs, ETFs, Equities,
Gilts / bonds, Structured products, other
Flagged assets provide
important information on funds
Fund manager due diligence
• Can we administer asset
–
–
–
–
–
–
Pricing
Trading
Distributions / rebates
Reconciliations
Meets nominee requirements
Meets AML requirements
• Does not consider
– Performance of fund
– Security of fund manager / fund assets
– Suitability of asset for client
Discretionary Fund Management (DFM)
For IFAs
-Investment management
outsourced
-Transparent fee structure
-Retain control of client
For DFMs
-Easily offer model portfolios to
multiple parties with single
login
- direct remuneration with
transparent fee
For clients
- Cost effective mechanism of
achieving best of breed IFA
and DFM services
IFA
New business
Client management
DFM
Model portfolio mgt
Rebalancing
Trading
DFM functionality
• Both IFA and DFM access the same client with
their own platform logins
• Post-sales illustration will list ‘investment
management fee’
• Transaction history shows ‘investment
management fee’
• Fees paid directly to DFM
• Reports:
– How much is in each model portfolio
– ‘What if I rebalance now’?
– DFM report – which accounts are using a DFM
DFM – how to set up
Complete the following documents:
1. Tri-partite agreement – between Nucleus, IFA,
DFM
–
–
completed once per 3 parties
Provides terms and conditions for service
2. DFM client authority
–
–
completed once per client
Specifies date DFM service starts and fees
APPENDICES
Pension - Key Benefits
• Open to all UK residents, including non earners
• SIPPs open to very wide range of assets
• Highly tax efficient
– Relief on contributions at highest marginal rate except high
earners (£150k +)
– Can put in 100% of earnings up to annual allowance ceiling
(currently £245k)
• But Gov’t is looking to reduce this contribution ceiling to £40k per
annum
– Funds grow in a tax free wrapper as long as do not exceed
lifetime allowance ceiling (currently £1.8m).
• But Gov’t is looking to reduce this to £1.5m
– Up to 25% of the fund can be taken as a tax free withdrawal at
any point after age 55
Pension – Key Benefits
•
Flexibility on withdrawal
– Up to 25% available as tax free cash
– Use the remainder to buy an annuity (not necessarily with the same provider)
– Draw a taxable income directly from the fund as an unsecured pension (USP or
Income Drawdown)
– Draw a taxable income from age 77 as an alternatively secured pension (ASP)
• Like income drawdown but with more restrictions
•
SIPPs can be used for:
– Greater flexibility and control than traditional pension plans
– Consolidating a number of different pensions arrangements
– Attracting money from poorly performing and/or expensive personal pensions
• Most PPs started from late 90s onwards will not have exit penalties
– Protected Rights – up to £500bn in PR pots now accessible to SIPPs
– Investing for someone else e.g. spouse, partner, child
• Attracts tax relief
• No impact on investor’s tax bill
Income Drawdown – Key Benefits
• Timing Flexibility
– Can remain invested in the market rather than use all of the
accumulated funds to get the best annuity rates in the market at the
time
– Decision can be deferred
• Annuity rates improve as client gets older
• Growth in the fund in the meantime
• Possibly better pension than could have been secured at the outset
– Investors can vary the amount they withdraw and when
– Phased Retirement
• Can put some into an annuity to obtain accompanying guarantees with
remainder in drawdown
– Keeps options open
• Can always go for an annuity later but once purchased, that’s it…
Note: Each time money is moved to drawdown it counts as a Benefit Crystallization Event
(BCE) which could trigger an immediate review and therefore an adjustment of the
max. income that can be taken.
Income Drawdown – Key Benefits
•
Investment Flexibility
– Can change the funds used over time to get better growth or to manage risk
better
– Can select the types of funds (e.g. Cash) that they want the income to be drawn
down from
•
Risk Management Flexibility
– USPs and ASPs can be shaped around risk appetite and other investment
options to provide more flexible approach than annuities e.g.:
• If SIPP the primary provision then need to balance a cautious investment approach with
a desire for income
• If not the only source then can perhaps afford to invest more aggressively with the
possibility of improved income as a result
•
Lifestyle Flexibility
– Don’t need to stop work. SIPPs/Income Drawdown can be part of a gradual
switch out of work related earnings
– Access to tax free cash for mortgage repayment, university fees etc.
•
Flexibility on Death Benefits
– Continue with the drawdown
– Take a lump sum (subject to 35% tax)
– Purchase an annuity
Onshore Bonds – Key Benefits
• ‘Life’ funds so no CGT liability to the investor. Growth is subject to
income tax rules but even so – not necessarily payable in the hands
of the investor when it’s released
• Liability to investor only arises at encashment.
– Assessment for high rate tax is made but growth divided by number of
years product has been invested
– Unless that pushes investor into high rate bracket, no tax is due
• Up to 5% of original investment can be taken each year without
having to be disclosed for tax. Can be carried forward.
• Very flexible
– 5% withdrawals free of any cash in or dealing charge
– Active investors can make switches free from CGT
– Can be added to and accessed relative easily
Onshore Bonds – Key Benefits
• Retirement Planning
– High rate taxpayers now but don’t expect to be when they’re retired
• Can take out 5% per annum with no immediate tax liability
• Tax is paid on net profits after tax already paid on the fund
• Tax on the investor deferred until they cash it in – if they are within the basic
rate (98% are) then no tax to pay
– Over 65 and want an income
• withdrawals up to the 5% limit won’t affect the age related tax allowance
– Not included in means testing assessment for residential care home
costs
• Tax Planning
– Higher rate taxpayers investing in funds that produce interest or
dividends
• No tax payable until encashment
• A collective based investment would have an annual tax liability that would
need to be disclosed
– Higher rate taxpayers with partners on the basic rate
• Bond can be assigned with no tax charge if designated a gift
• No further tax to pay as long as they remain a basic rate taxpayer
Onshore Bonds – Key Benefits
• Inheritance Tax Planning
– Can be written under trust
• Assigned to a beneficiary with the future tax charge being assessed on that
beneficiary
• Can be written on a joint life basis for greater flexibility
• University Fees
– Can assign the bond to the child (from age 18) with no tax charge if
designated a gift
– Any future tax charge assessed on the child and their tax status
Offshore Bonds – Key Benefits
• A ‘life’ contract issued by a non UK life assurance
company usually based in the Isle of Man, Dublin or the
Channel Islands.
• Benefits from ‘gross’ roll up outside the UK tax system
– except for unrecoverable withholding tax on dividends and
interest which varies from country to country
– Investors may have to pay cash when the y take the money but
with planning they can control what and when they pay
• Normally able to access a wider range of asset types
than onshore bonds
Offshore Bonds – Key Benefits
• Trust Planning
– The is considerable scope to write an offshore bond within a trust.
– Main drivers are:
• Probate Avoidance – can take the bond outside the estate of the investor in
the event of death
• Taxation – can transfer assets into a trust thereby reducing their personal
wealth and their estate’s exposure to IHT
• Other reasons – to apply specific discretion over the release of assets
perhaps where divorce is imminent or the beneficiaries are too young
– RL360 able to provide extensive support and expertise
Offshore Bonds – Trust Planning
• Beneficiary Trusts if
– Investors don’t want to have to appoint trustees during their lifetime
– Know that intended trustees will act for them following their death
– Want to ensure that intended beneficiaries will
• Isle of Man Probate Trust if
– Want to retain access to the investment
– Wish to avoid Isle of Man probate and ensure prompt payment of
proceeds
– Need a trust to be created now rather than at death
– Have no need for UK IHT planning at this point
• Gift Trusts if
– UK domiciled for IHT purposes
– Wish to reduce value of estate exposed to IHT
– Want to gift away capital with no requirement for future access
Offshore Bonds – Trust Planning
•
Loan Trust if
–
–
–
–
–
•
UK domiciled for IHT purposes
OK to gift away future growth but need access to capital
Need flexibility around frequency and amount of capital payments
Don’t want to create a potentially exempt transfer or chargeable lifetime transfer
Might want to do more IHT planning in the future
International Flexible Trust if
– Wish to retain access to investment and growth
– May become UK domiciled and will require protection from IHT
– Want to provide trustees with full discretion on who can benefit
•
New Discounted Gift Trust if
– UK domiciled
– Looking to reduce value of IHT estate and prepared to make a gift whilst
retaining the need for regular access
– OK to gift away potential growth on the investment
– Need an immediate reduction in IHT exposure
– Are in good health !
• HMRC require us to ensure that this is not deathbed planning to avoid an imminent tax
liability so we will need to obtain a medical report
Offshore Bonds – Key Benefits
• Tax Planning
– Rules around income withdrawals broadly similar to onshore bonds
– Tax payable at encashment dependent on
• Tax band the client is in at the time and the extent to which the bond pushes
then into the higher rate band
• Whether or not they have lived abroad while they had the plan (and
therefore not liable to UK tax)
• Whether or not they now live abroad, in which case they are subject to that
country’s laws
• Retirement Planning
– High rate taxpayers now but don’t expect to be when they’re retired
• Can take out 5% per annum with no immediate tax liability
• Tax on the investor deferred until they cash it in – if they are within the basic
rate (98% are) then no tax to pay
– Prospect of lower ceiling to pension contributions that will attract tax
relief
• Offshore bond able to grow gross of tax and can provide a ‘tax free’ income
for up to 20 years.
• No tax relief on actual contributions but same might be said for contributions
above the maximum for pensions
ISAs – Key Benefits
•
Tax Planning
–
–
–
•
Retirement Planning
–
–
•
Will save investors money if they are a high rate tax payer or likely to have to pay CGT
Even with the unrecoverable 10% dividend tax (payable whether inside an ISA or not) still
much less than the 32.5% that would be deducted from non ISA investments
Introduction of the 50% tax rate for those earning over £150k pa has made ISAs even more
attractive for this group. Effectively a couple is now able to remove £20,400 per annum from
tax each year by placing into an ISA wrapper
For investors over the age of 65, income from an ISA will not affect their age related personal
allowance
ISAs can be used to generate tax free income in retirement. Can use annual allowance to
invest in equity over a number of years and then switch into tax free income producing
assets at retirement
Open to a very wide range of assets
–
–
–
–
–
–
–
Shares and corporate bonds
Gilt edged securities
Government Bonds
Unit trusts, investment trusts, OEICs
Any shares which have been transferred from an approved SAYE share option scheme
Life assurance policies
ETFs