Financial planning has got to change and will begin to evolve quickly as a result of the Budget, according to Roddy Munro, head of technical sales at Quilter.
Speaking at the PFS conference in Manchester (November 12), Munro discussed how financial planners had to throw out the “old financial planning handbook” and start to think differently as a result of the changes chancellor Rachel Reeves announced in her Budget last month.
He said: “This Budget brings the biggest shake up to financial planning in a long time. Bringing pensions into the IHT regime is probably the biggest structural change I've seen in the 34 years that I've been involved in this industry.”
Munro told members they needed to understand the narrative shift this Budget has brought irrespective of their own personal political views.
He said Reeves had looked to target people with capital and assets through her £40bn worth of tax hikes adding there had been a “massive structural shift in the underlying economic tone".
“When it comes to financial planning, from today, we need to start to rip up yesterday's financial planning rule book and open tomorrow's. As we go on a journey over the next few years and as we head towards April 2027, we'll find that things will evolve at some pace.
“What's going to be critical though, in re-wrapping and protecting client wealth, is access to tax wrappers. All forms of tax wrappers and trusts are going to be really critical going forward as well,” Munro added.
He highlighted that advisers would need to solve the challenges created by Reeves’ Budget while clients were in accumulation not just through tax wrappers but also through on-platform cash management solutions.
IHT on pensions
Based on the changes announced by Reeves, inherited pensions will become subject to IHT from April 2027, Munro believed this made it “exceptionally clear” that Labour did not want pensions to be used as intergenerational wealth transfer.
“The death structures that we have today are very attractive and the abolition of the LTA made them even more attractive. We remember what Reeves said the day after it was announced the LTA would be abolished. She said 'we'll put it back in'. She quickly realised that she couldn't do that, but she's brought it in another way.
“And actually, the impact of this is far deeper than trying to put the LTA back in. This is a significant change, and this is probably one of the biggest changes I've seen in my time,” he said.
Munro emphasised that drawdown would become a “critical tool” for advisers as they enter this “new world”.
Although the changes would be complex, Munro urged the audience to “slow down” and not get caught up in the changes just yet as there was still time to see how the changes would play out over the coming months and years.
“I want everyone just to take their foot off the gas with this stuff. I've already spoken to many advisers who are thinking in tomorrow's world and they will trip up. Remember the death benefit regime is with us until midnight on April 5 2027, so that starts to give us some food for thought about things that we need to consider,” he explained.
