Rebecca Hodges looks at the impact of Consumer Duty on Business Relief for IHT mitigation

With the implementation date for Consumer Duty fast approaching, we consider below how Business Relief (BR)-qualifying services may be impacted by the new regulatory framework.

So, what does the new consumer principle “Must act to deliver good outcomes for retail customers” mean when applied to BR?

Traditionally, financial plans are considered through the lens of agreeing an objective at the outset. In the BR world, most customers approach the investment seeking a clear objective: mitigation of the impact of inheritance tax (IHT) on their investment upon death.

If a client sets out this objective, failing to mitigate the effects of IHT on death would mean, at least in part, failing to achieve a good outcome.

In addition to the primary objective, the emphasis on considering the specific client’s needs means financial plans must consider the bigger picture. So what should this look like for BR clients? In addition to considering investor risk tolerance and the general suitability of an investment, this could be summarised in the following way:

  • Mitigate the impact of IHT whenever death occurs.
  • Protect and carefully grow wealth over the long term so the best possible legacy can be passed on to beneficiaries.
  • Ensure fees and charges are reasonable while maximising the utility of the service to deliver fair value
  • Offer flexibility, for instance, a facility for regular withdrawals or complete withdrawal if necessary.
  • Consider any further specific needs of each client. They might be vulnerable and require particular assistance, or they could benefit from a care planning service.

This approach raises the bar for manufacturers, financial advisers and research firms and might require advisers to consider different solutions to those previously advised.

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