In this edition...
- Investing in clean technology for tomorrow’s renewable economy Hamish Chamberlayne, Head of Global Sustainable Equities
- Will there be a soft landing for the UK housing market? Katie Poulson, Client Engagement & Marketing Manager - RSMR
- The changing face of growth James Budden, Director of Marketing and Distribution - Baillie Gifford & Co
- Managing CGT through unitised funds ,
- Higher inflation not the end of the 60/40 portfolio Giulio Renzi-Ricci, Head of Asset Allocation - Vanguard
- Reality will bite for central banks Ariel Bezalel, Investment Manager, Jupiter Strategic Bond Fund - Jupiter
- The Synaptic Pathways guide to research and due diligence ,
- Offering self-reliance in due diligence for reviews ,
- How to approach reviews: the task that defines firms Eric Armstrong, Client Director - Synaptic
- Integrate your Centralised Investment Proposition (CIP) with Synaptic Pathways ,
- Synaptic Pathways can take your firm’s asset allocation a step further than Nobel prize winning Modern Portfolio Theory ,
- The first rule of financial planning: insure the breadwinner Synaptic,
- Hours to minutes Synaptic,
Cuts to the capital gains tax (CGT) exemption could see advisers flocking to unitised funds as a way of helping clients manage potential tax liabilities.
On 6 April, the annual CGT exemption was slashed from £12,300 to £6,000, and it is due to be cut again to just £3,000 in the 2024/25 tax year. The reduction could see many more clients who hold investments outside an ISA or SIPP breaching their allowance and facing large tax liabilities as a result.
Tax treatment of unitised funds
Investing through a unitised fund could be one way of reducing the CGT burden. When an investment manager sells underlying investments within a unitised fund, it doesn’t give rise to a CGT liability. Instead, a potential liability only occurs when the investor sells units of the fund itself.
Generally, with a model portfolio, investments are held directly by the client, which means gains (or losses) will usually contribute to the client’s annual CGT exemption (unless, of course, the portfolio is held within a tax-efficient wrapper). Exactly how much of their exemption is used up will depend on how many underlying investments were bought or sold, and how the investments performed. The reduction in the CGT exemption makes it more likely that investors will exceed their allowance and pay tax on investment gains in any given year.
At RBC Brewin Dolphin, most of the assets in our unitised Voyager Funds and Managed Portfolio Service (MPS) are held through our MI Select Manager (MISM) Funds. The MISM Funds are ‘manager of managers’ funds and include mandates with institutional-level fees, which means they are very competitively priced. Many of the changes we make will take place within the MISM Funds, either by moving funds between the managers or by replacing a manager. These changes do not give rise to a CGT liability as this only occurs when units in the fund are sold. This approach may help to make the most of your client’s annual CGT exemption.
Long track record
Anecdotally, we’ve seen an increase in the number of advisers choosing our unitised Voyager Funds since the CGT changes were announced. Funds under management have hit an impressive £850m, less than three years after the funds were launched in October 2020. The funds were created in response to adviser demand for more choice and to extend opportunities to invest to more clients.
While the different tax treatment is no doubt part of the appeal of the Voyager Funds, it also reflects the existing track record we’ve built up through MPS, which was launched back in 2008. Each Voyager Fund is mapped to its equivalent MPS portfolio, so the investment approach behind the funds is well established.
"Anecdotally, we’ve seen an increase in the number of advisers choosing our unitised Voyager Funds since the CGT changes were announced. Funds under management have hit an impressive £850m, less than three years after the funds were launched in October 2020."
Today, there are six funds within the Voyager range, catering for a range of investment risk appetites. The sixth fund, Voyager Max 100% Equity, was launched in autumn 2021, after advisers requested a fund at the highest end of the risk spectrum. The other five funds have maximum equity exposures ranging from 40% to 90%. The funds invest across different asset classes, regions, sectors and styles, offering ready-made diversification.
Being able to offer advisers the choice of a unitised fund, model portfolio or bespoke discretionary fund management service, in addition to sustainable investment options, means we offer a solution to suit every client. Each solution has different implications when it comes to managing CGT as well as other taxes such as income tax and dividend tax. Advisers can choose the approach that best suits their client’s needs and objectives, safe in the knowledge that the investment philosophy behind each solution has been honed over more than 25 years. Whatever is happening in the world of tax planning and in financial markets, you can rest assured that your clients’ investments are in good hands.
About RBC Brewin Dolphin
Our firm's origins can be traced back to 1762 and we have been managing clients' discretionary portfolios in partnership with advisers for more than 25 years.
In September 2022, Brewin Dolphin formally became part of the RBC group of companies, creating a wealth manager covering the UK, Channel Islands and Ireland with £54bn in assets under management as at 31 July 2023, the majority of which is under our discretion.
RBC Brewin Dolphin has more than 30 regional offices and over 2,100 employees and offers personalised wealth management services from bespoke, discretionary investment to retirement planning and tax-efficient investing.
In addition to bespoke discretionary management, RBC Brewin Dolphin offers seven Active MPS, seven Passive Plus MPS and five Sustainable MPS, with expected risk and return varying through each range, and the Voyager fund range, which consists of six risk-rated multi-asset funds.
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The value of investments, and any income from them, can fall and you may get back less than you invested. This does not constitute tax or legal advice. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Opinions expressed in this publication are not necessarily the views held throughout RBC Brewin Dolphin Ltd.
RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444) and regulated in Jersey by the Financial Services Commission. Registered Office; 12 Smithfield Street, London, EC1A 9BD. Registered in England and Wales company number: 2135876. VAT number: GB 690 8994 69
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