Emerging from uncertain times

The future for private wealth

Commentary from our Private Wealth specialists, Rebecca Durrant and Phil Smithyes.

To emerge successfully from this period of uncertainty, wealthy individuals and family business owners must look ahead to predict what the future private wealth landscape looks like.

Tax challenges

The current scenario presents challenges regardless of stage of life or business. Protection ranks high among the concerns, whether it is around inheritance and updating wills, whether to pass on wealth by making gifts to loved ones, creating trusts or implementing lasting powers of attorney.

A re-evaluation of existing succession and retirement plans is vital, while individuals will also be acutely aware that the government schemes created to guide people and organisations through the crisis will need to be paid for. While today’s statement was silent on any tax increases at the moment, there were additional announcements on funding for job retention. We are therefore expecting some significant tax changes in the autumn Budget.

Increased tax rates will impact investments, asset sales and business income, while planning will be crucial to navigate potential legislative changes to inheritance tax. The prospect of a wealth tax should not be ruled out.

Financial planning for long-term success

Financial planning is a lifelong journey and, unsettling as these times have been, individuals should remain optimistic and focus on their longer-term goals. This period, post-crisis, is an opportunity to review investment strategies, understand the risk they are taking with their investments and, where necessary, temporarily reduce or suspend income withdrawals.

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Rebecca Durrant, Partner and Head of Private Clients at Crowe, said:

"Asset values tumbled during the pandemic before recovering slightly. While this makes tax efficient asset-gifting easier, it also reduces pension levels and may impact property investments and business valuations which typically form part of a retirement or succession plan.

"The pandemic has definitively moved the goalposts. For many family business owners whose business valuations have taken a hit, this could mean tearing up the succession plan and reassessing the appropriate time at which to step away from work with sufficient funds for a comfortable retirement.

"Ensuring lines of communication are maintained is crucial in the management of uncertainty in a crisis. Our advice to clients is to deal with the immediate short-term while remaining alive to resilience-building – both for the present and for future generations."

Phil Smithyes, Partner at Crowe, said:

“Fear should start to subside as confidence begins to be restored and this will support global markets. Most private investors have sensibly diversified their investment portfolios and, as equity values fell, the demand for lower risk assets rose. This diversification helped to provide cushioning to investors on the downside.

"Any ‘risk on’ investment strategy should be for the long-term and, irrespective of market conditions, clients should not become fixated on day-to-day prices, nor let fear drive decisions that may later be seen as irrational.

"Positive signs should not be overlooked. Many of our clients receiving their recent annual valuation reports have been pleasantly surprised by the numbers. However, positive news such as the rally in equity markets (the US stock market recorded its strongest month in May since 1987), has received little media coverage.

As global consumer demand returns, those businesses and sectors who have innovated and invested should flourish and this should create investment opportunities for growth.”

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