May 17 – Wider conversations with customers
There have been a number of recent changes in the market that impact the wider conversations that advisers have with customers and AMI has been providing guidance to members.
This includes the recent introduction of the Lifetime ISA (LISA) and how it interacts with other savings products. The LISA is a more complex product than other ISAs because it caters for two different consumer needs likely to be short-medium term (property purchase) or long term (retirement) and the consumer may change the purpose during its lifetime. Consumers may see it as a hybrid of both an ISA and a pension and may not understand the impact of the early withdrawal charge.
Advice around LISAs should form part of an individual’s overall financial planning and because of the interplay with pension contributions and other investments, such advice may be outside of scope. Brokers may therefore want to limit discussions to how LISAs operate.
In addition, last month saw the start of the phasing out of tax relief so landlords will no longer be able to claim finance costs as a deduction from rental income to calculate rental profit. With many changes in the buy to let sector affecting individuals, it is not surprising that there has been increased interest in limited company buy to let products. However, deciding whether a limited company is the best solution for a customer requires detailed discussions with a tax adviser. While it may appear in some cases to be a cheaper or more viable option for a customer, it has wider implications on an individual’s overall financial planning, particularly on how income from the company can be subsequently withdrawn. Conversations should be limited to how products differ, with a strong recommendation to seek tax advice.
While brokers should be aware of these areas, care needs to be taken to ensure advisers do not stray outside of their scope and the limits of their PI cover.
Senior Policy Adviser