The Spring Budget brought a welcome sense of normality back to the treasury against a backdrop of positive forecasting, but what does it really mean for advisers and where do the opportunities lie?
The Spring Budget, delivered at the dispatch box by a chancellor who has maintained his position for almost half a year, offers a welcome return to normality.
The ghosts of a Mini-Budget past feel like a hazy dream, or nightmare, even with a further rise in inflation and interest rates throughout March. The Chancellor delivered his Spring Budget against a backdrop of precious positive news from the OBR.
The oncoming economic downturn predicted last year is set to be shorter and shallower, whilst medium-term output is set to be higher, whilst the Treasury’s deficit and public debt are also both forecast to drop.
The chief aim of this year's Spring Budget? Retaining the financial markets’ confidence, increasing business expenditure and boosting workforce participation.
But what does this mean for you, your clients AND your firm. Most importantly, where do the opportunities lie?
Now that the dust has truly settled on the Spring Budget 2023, we’ll outline the important details, and tell you pragmatically how to make the most of new fiscal changes.
A Note on the Bigger Picture
Economic predictions made for grim reading at the tail end of 2022.
Various independent bodies forecasted a 0.7% contraction in UK GDP. The OBR added that the economic situation would tip the UK into a recession lasting just over a year from the third quarter of 2022. Client anxiety, for close family members if not for themselves, was extremely high.
Fast forward just four months and a wealthier treasury, the halving of energy prices, and a slew of more optimistic economic forecasts will have improved the mood of most.
Despite this, it’s important to remember where we are.
War rages on in Ukraine, energy prices are twice what they were in 2021 and families are being squeezed more than they ever have been with rising inflation and interest rates.
Your clients personal situation might be positive, but anxiety may still persist around their extended family situation.
Satisfying your client, therefore, might mean changing your approach to advice for some.
This could take the form of more regular check-ins, whether face-to-face or remotely, or adopting a different approach to meetings.
It might even go as far as meeting with wider family members free of charge for one or two sessions.
Small acts like this may be time consuming, but they will be remembered by your clients kindly, and will almost certainly boost referrals and client satisfaction.
If you would like to read more on the topic, click here.
The Pensions Budget - An Opportunity to Add Value
Budgets in recent years have had little impact on pensions, but this year was different.
Pensions made the headlines with the Chancellor announcing that the lifetime allowance and annual allowance are set to change significantly.
The target of this announcement seems to be high earning public sector workers, particularly those in the NHS, as the government tries to stop the exodus of doctors and consultants or even encourage older workers back to work.
Nonetheless, this change will affect all clients with large pension pots and communication is key. The proposed changes give rise to greater flexibility in pension planning.
So what should advisers consider?
- Communicate the proposed changes to those who may be affected and reach out directly to those who you know are impacted by the current pension lifetime or annual allowance.
- Set up meetings to discuss options - even a short video call will add value.
- Be aware of those clients who have taken steps to protect their pensions through the various forms of Transitional Protection. These protections can be subject to limitations and penalties if breached.
- Consider how your high earning clients may want to change their saving strategy to make the most of the proposed pension changes.
- Business owners who fund pensions through lump sums may want to take advantage of the higher annual allowance.
- Although these changes sound positive for some, be mindful that Keir Starmer has stated that a Labour government may reverse the decision.
Ultimately, communication is key.
Use this as an opportunity to connect with clients.
Even if no action is required, it will be welcomed and ensure that you remain front of mind. You never know, on the back of this call, your client may just mention you to their friend or colleague who’s looking for advice.
No Change to the IHT Threshold - Time to Broaden the Conversation
With the Budget making no change to the IHT threshold, increased opportunity for pension savings will accentuate their attractiveness as a vehicle to avoid paying IHT. The inevitable death tax impacts increasing numbers of families, meaning that wealth preservation across generations is an increasingly important topic of conversation.
With intergenerational wealth transfer a key challenge for advisers, every opportunity should be taken to broaden the conversation and engage future generations in financial planning.
The Budget gives advisers the opportunity to discuss wealth transfer and engage with this future generation of clients. Many in the sector are seeing increasing value in advising families rather than individual clients and shaping a service to deliver this profitably.
The opportunity exists to develop a leaner, value added service to wealth accumulators. The freeze in the IHT threshold will help you communicate a proposition that supports families and ensures you don’t fall into the trap of losing client assets when they pass down to children.
Your clients trust you, which means they’ll trust, value and almost certainly encourage you looking after the wellbeing of their children. Start the conversation with clients about a service that helps their children achieve financial independence.
Ensuring spring time success with JustFA
Whatever the Spring Budget may, or may not mean for your clients’ finances this year, it’s absolutely essential clarity is offered, and advice is carried out effectively and efficiently at a time of almost constant change.
With a range of remote communication tools, as well as paperless documentation, investment wrapper features and more, the JustFA platform facilitates exactly that, adding firm value and boosting client satisfaction.
If you’d like to see how it works, book a demo with us today.