When is it time to go 'on furlough'?

Under the scheme, self-employed Ifa directors can declare there is insufficient work for them to remain working. 

Doing so allows them to qualify for 80 per cent of their regular wage to be paid through the government’s CJRS, up to a monthly cap of £2,500.

The moment you furlough yourself you are effectively saying you are not working. For advisers, that can present a massive danger.--Jazz Jhumat

What to consider

However, those claiming cash under the CJRS are not permitted to work.

Doing so, could result in prosecution for fraud at a later date, according to the government guidelines.

Jazz Jhumat, a financial adviser at JJFS, says intermediaries will need to think very carefully before choosing this route, as doing so prevents you from working for the entire period for which you are furloughed. This, she says, may have dramatic consequences for your client book.

“The moment you furlough yourself you are effectively saying you are not working,” she says. “For advisers, that can present a massive danger. You cannot work at all. This includes submitting new cases or reviewing existing clients.”

Ms Jhumat highlights that there is another catch to the CJRS scheme for self-employed advisers who operate through a limited company structure, and receive the majority of their pay through a dividend, rather than a monthly salary. 

The JRS scheme only recognises the salaried element of your take home pay, which means 80 per cent of £1,041.66 per month, for those with a salary aligned with the annual personal tax allowance.

However, for those who are salaried at a level where the 80 per cent payment affords a manageable standard of living, it may be an option, she says.

“You have got to make a decision based on your current situation,” she says. “If you can’t continue to maintain your wage, furlough is absolutely the right thing to do.”

Making the call

Claire Woolf, a lawyer at Sparqa Legal, says that advisers unsure as to whether furloughing will make sense for them, should look at the UK government’s ‘support finder’ tool which outlines the pros and cons of a range of support packages.

However, she stresses that self-employed advisers with no employees are likely to be more drastically affected by furloughing than those who run small businesses.

“As a one man band, they will therefore almost certainly have to cease trading for a temporary period, which would include contacting clients/doing any business development work,” Ms Woolf notes. 

Communication is essential and financial advisers should aim to speak to all of their clients before taking a decision to self-furlough.--Andrew Brookes

“They need to query whether it’s worth it based on what they are able to claim.”

Ms Jhumat adds that advisers should also consult their networks if they are unsure of the implications of opting for the furlough scheme. 

She praises her own network – HLP – for the support they have offered to date, including detailed explanations of the consequences of taking the furlough option. 

She says other advisers should look to their network for further guidance if they are in any doubt about whether the scheme could work for them.

“Our network has been excellent,” she adds. “They outlined what you need to consider on whether it makes sense to furlough yourself.”

Taking the leap

For those advisers for whom the furlough option does appeal, plans will need to be made to advise clients and update company communications and websites to advise of the absence, or closure if the company has just one employee.

“As noted above, they won’t be allowed to do any work during furlough leave and this will include having contact with clients for marketing/business development purposes,” explains Ms Woolf. 

Once furloughed, individuals can’t respond to client emails or otherwise stay in touch with clients.--Andrew Brookes

“They will need to make contact with clients to let them know about the situation before they go on leave and let them know when they plan to return.” 

Andrew Brookes, senior tax manager at accountancy firm Menzies agrees, saying that these client interactions can even act to stimulate new business enquiries when the adviser returns to work.

He says: “Communication is essential and financial advisers should aim to speak to all of their clients before taking a decision to self-furlough.

"By speaking to clients in good time, they will have the opportunity to ask questions and make changes, which could trigger a requirement for your services.”

Mr Brookes notes that furloughing does not necessarily mean an end to client communications for a block period, however.

The government scheme does allow advisers to break up their leave, return to work and then go back on furlough at a later date. 

He adds: “Once furloughed, individuals can’t respond to client emails or otherwise stay in touch with clients.

"However, it is possible to self-furlough for the minimum qualifying period of three weeks, then re-start for a temporary period in order to update clients and respond to their enquiries, before self-furloughing for another three-week period. 

“If the CJRS is extended by the government, owner director financial advisers could continue in this way indefinitely. This would enable them to keep their businesses going, safe in the knowledge that if a significant amount of new work comes in, they could break their furlough and return at any point.”

Taking this option, of course, reduces the risk that clients will look elsewhere for their advice during the period that their regular Ifa is out of action.

“It’s worth considering this very carefully,” says Joanne Harris, technical commercial manager at SJD Accountancy. 

“With so many people requiring financial advice, there is a potential risk that clients go elsewhere and not return."

Joe McGrath is a freelance journalist