Later Life  

How to help clients facing later life planning challenges

  • Identify biggest challenges facing later life planning
  • Explain how to help clients prepare for future and unpredictable costs
  • Explain how to mitigate certain risks in later life planning
CPD
Approx.30min

Desired outcomes

Here is an example of a desired outcome of someone planning for later life;

To invest capital in a way that maintains flexibility throughout later life to pay for any unplanned needs, but also consider any potential care needs that might be needed, knowing that their wealth has been successfully grown up to the point of death, so maximising the legacy that will be passed onto the chosen beneficiaries.

Breaking it down into individual objectives, the adviser needs to:

  1. Maximise wealth through continued investment growth
  2. Maintain flexibility and access to the investment, so they can make regular or lump sum withdrawals
  3. Provide both financial and logistical support to the delivery of care needs if ever needed
  4. Reduce the potential for Inheritance Tax (IHT)

The danger of focusing on the estate planning part of these objectives is twofold.

Firstly, the threat of impending tax changes, or tax relief changes, causes uncertainty as to the efficacy of any purely tax-focused strategy. And this remains the case whether one feels they can predict the future or not.

Secondly, the danger of ignoring the other higher priority objectives, as many tax-focused strategies are a one-trick pony and restrict the potential for wider benefits.

In this case, the investor may have to forgo any long-term investment growth, or the flexibility to easily and predictably access the investment to pay for care, for instance.

So, when considering the threat of tax changes to later life planning, the approach should always be to allow the investment rationale and wider utility of the service you recommend to lead the planning decisions, rather than just narrowly focusing on the tax benefits.

Ongoing volatility

Another challenge that is particularly unwelcome in later life and particularly visible in the current environment is the potential for continuing investment volatility.

In this phase of their lives, investors are unlikely to have the flexibility to “time the market” when they want access to their wealth.

For instance, making a withdrawal to help family members in need, pay for care requirements or ultimately passing the investment onto beneficiaries upon death.

These are not predictable events. Reflecting upon the volatility of markets in 2020 and the uncertainty of 2021 and beyond, investors may well be minded to forgo any potential upside of an investment, perceiving them as too risky.

However, an alternative, as many asset managers have been doing over the last decade, is to look to private investments that are not exposed to market sentiment in the same way as listed investments are.

While on the face of it this sounds riskier, certain investment strategies can provide investors with an appealing level of security and predictable returns.

One way to do this is via private companies that engage in secured lending.