More of the same only different!

Networking has always been at the heart of winning business within the private client industry. You can hardly go up to a prospective client at the Monaco boat show with an elevator pitch on death and taxes!

But our old ways of winning business going to events, picking up business cards during the breakout sessions, listening to boring talks while catching up with emails produces only a poor return on investment so we need more of the same only different Caroline’s Club is designed to do just that.

The old way of networking was to push product – ‘this is what I do and here is where you can contact me’ – whereas Caroline’s Club is taking an interest in others and building trust with our clients and our network 

We need to learn what the wider concerns and interests of our clients are and to match them with the expertise and products of the private client professionals within our network. This builds trust–and is what I call a ‘Culture of Care’.

But to network effectively and efficiently do we need to meet physically? –Post lockdown we have proved it is not strictly necessary – although in due course we will want to do so. However, for the time being we can use digital tools to connect and learn; blogs, podcasts, webinars, zoom calls and digital directories; not to replicate what we did face to face pre lockdown but to use the digital tools in a slightly different way to network more efficiently and effectively and build trust.

But first we need a strategy –

1. Every private client professional needs to care for the wider interests and concerns of their clients.

2. Each private client professional needs to engage with other private client professionals who provide the services and products they do not have

3. Each private client professional needs to take the time to engage with these other private client professionals who have a similar mind set, with the purpose of

4. Creating a Culture of Care

This strategy then leads to our manifesto which is to ‘Reimagine the role of the private client industry – post lockdown through Caroline’s Club where our focus is to bring care and compassion to our clients, using the five digital tools at our disposal; podcasts, blogs, zoom calls, webinars, and digital directories which provide us with a personal digital platform’

 So how does Caroline’s Club reposition the tools at our disposal to network more efficiently and effectively – and do something different?

1 - Our Blogs

I started writing a blog in 2015 for my wider network of 8,000 a Note from Caroline, now other members of Caroline’s Club can add their voice with their thoughts, experiences and ideas through articles and blogs which we can post on our blog page.

2 - Our podcasts

Our podcasts are not for education or entertaining, they are audio brochures, which set out who our professionals are, what they do, who for and why. Nothing high-brow or difficult nothing more than their own personal story. 

- Analytics and Reporting

The great advantage of being digital is that we can track everything and everyone, who is reading what, who is engaged and with what and how to tweak what they say to get a better open rate – real time, accurate feedback

- Our network

Our members are leading private client ambassadors within their area of expertise, who are eager to share their experience and knowledge with our other members – we are therefore in excellent company

3 - Webinars

Our webinars are again nothing complicated just a panel of private client professionals telling us their client stories around a theme, topic or jurisdiction which is pre-recorded and played at our meetings

4 - Our Meetings

At our meetings our attendance is through zoom calls where we listen to a topical pre-recorded webinar and then we break out into ‘network bubbles’ in which each of us can share their own client story with other private client professionals

5 - Our digital directory

Our Digital Directory lists all our members in one place providing each with a personal platform to promote their services and products, through podcasts, webinars, blogs, zoom meetings and client stories. Caroline’s Club is designed to keep everyone better informed, better able to serve their clients and to make the world a better place post lockdown through a Culture of Care. 

Episode 38 -

Active Investing, Charlotte Thorne: CapGen

In Episode 38, Caroline Garnham speaks with Charlotte Thorn, a Founding Partner of Capital Generation Partners. Charlotte's focus is on maintaining excellence in the firm's external interactions - with clients, regulators and providers. Charlotte runs the mechanics of the firm and oversees the complexities of client take-on and marrying client needs to service delivery. Listen to find out more about the interesting work CapGen are doing.

Our next open meeting is on the 21st January and the meeting following which will include a pre-recorded webinar from 5 leading family office specialists who will then join our network bubbles will be on 23rd February 2021

If you would like to join our club, sign up to our meetings and meet our network simply register here, or contact me on caroline@carolines.club

New Year’s revolution!

Who would have thought this time last year – that all our resolutions would turn to ashes at the feet of covid - 19. We have had a challenging year – even for those for whom the year has not been all bad – but now that we have an end in sight – vaccines to bring down the hospital overload, instant antigen testing – what will we do?

Go back to the world we once knew, or will we see the start of a revolution – something different?

I suspect it will be a mixed bag – we will go back to most of the things we enjoyed; holidays, eating out and spending our hard-earned money on friends and family – but we will also reconsider how we shop, eat, travel and network.

And what will our clients – the world’s wealth creators - have to look forward to, a return to a full order book, an uptake in hospitality and leisure industries and if successful – a wealth tax?

History and other countries indicate that a wealth tax should be left well alone – but maybe not?

We are all too aware that the recent lockdowns in the UK have blasted a £400 billion hole in the UK public finances – and this figure is still rising

The Wealth Tax Commission (WTC) a group of academic economists from the University of Warwick and the London School of Economics suggest a 5% levy on personal net wealth above £500,000 spread over 5 years will raise as much as £260 billion from only 8 million people.

It has done its own research and taken evidence from more than 50 tax experts, from think tanks (including the Institute of Fiscal Studies), and OECD club of nations, as well as lawyers and policy makers.

Within the definition of wealth, the WTC includes housing (including your primary residence), pension schemes, businesses and financial assets such as shares and funds.

But there will always be exemptions, in which no doubt our podcast professional of the week Matthew Steiner of Stellar would pay close attention.

In most wealth tax laws there are, asset classes such as woodland and farmland which are exempt with the effect that debt is secured against assets subject to the wealth tax and then used to invest in exempt assets which has the effect of distorting the market.

The next focus will be on whether private company shares or AIM investments will be exempt. If not, there will be a disincentive to build value within a business with the result that the entrepreneur will tread water for a few years until the tax is repealed or dissipate it through gifts. Either way the wealth tax if it includes businesses and AIM shares is a disincentive to the wealth creator– and is counter-productive in raising money

If it includes pension schemes it would be unfair on those wealth creators who have defined -contribution pensions, compared with those – usually in the public sector with a defined-benefit scheme – this distinction would be discriminatory against private-sector workers – and a further disincentive for the wealth creator.

In the UK the last time the government tried to raise a wealth tax under a Labour Government was between 1974 and 1979 when it could not decide what to assets to leave within the definition of wealth to make the tax worth the administration and bother to collect and what to leave out so as not to be unfair.

If everything is taken out other than property, such as homes and publicly quoted shares – this discriminates against the elderly who may have low incomes, may not find it easy or desirable to sell their home and are living off savings from taxed revenue. If savings are left out not to be unfair on the elderly – then you are left with a mansion tax – or something like it – which of course discriminates anyone living in London – thereby creating the level playing field which Boris seems to want to achieve!

But if you are going to sell up – why reinvest in property in the UK when you have proved able to work at home – why not relocate to lower tax jurisdictions such as to Guernsey, Jersey and Isle of Man?

Episode 37 -

Working with Partners, Matthew Steiner: Stellar AM

In Episode 37, Caroline Garnham speaks with Matthew Steiner, a Corporate Development Director at Stellar Asset Management. Matthew has over 20 years of experience in the Financial Service Industry. Caroline and Matthew talk about Stellars vision relating to investing for now, as well as investing for the next generation without having to pay inheritance tax!

History reveals that almost all countries which have tried a wealth tax have found it to be counterproductive.

France abandoned its version of the wealth tax two years ago as its wealthy residents took up residence in London. Sweden also repealed its wealth tax after nearly a century in 2007 which leaves only a handful countries clinging on to this form of taxation; Norway, Spain, Switzerland and Belgium.

Rishi Sunak whose father-in-law has a higher net value than the Queen ruled out a wealth tax in July but if he sticks to the Conservative manifesto not to raise income tax, NICs or VAT he does not have many options available; but we may seem some creative new names for variations on old ideas!

If you would like to serve your clients better and network more effectively and efficiently in the new year join Caroline’s Club. Join Carolines.club and sign up to our Client Stories Zoom meetings.

Investing as an entrepreneur

In Rishi Sunak’s recent spending review, published on 25th November 2020, we saw a glimpse of what might come down the track in years to come – higher taxes.

Although the Office of Budget Responsibility announced that the economy has not contracted as much as it had previously expected (11% rather than 13%,) we are still looking at public borrowing of £394bn this year.

Furthermore, most economic commentators are of the opinion that the economy will be too fragile to impose many tax hikes in next year’s March Budget. But it is widely believed we will see some serious increases in taxes by 2022.

Bagehot in the Economist says that Sunak has an ‘ingrained enthusiasm for balancing budgets and limiting expenditure’ which could be described as a ‘chip off the old Thatcherite block”.

So, with this in mind what can, and should we do? My hunch is that if Sunak listens to his economic advisers; our wealth creators – the entrepreneurs who employ people and build businesses – will fare reasonably well – so what can we do now if we are not business risk takers – to jump on this expected bandwagon……?

By investing into trading businesses and developing projects!

There are lots of reliefs for investors in businesses which are unlisted (other than on the Alternative Investment Market – AIM) which are unlikely to be attacked – and developing projects so it is likely we have one or two years – to ‘get our ducks in a row’.

One business which has recognised this opportunity is Stellar, formed in 2007 by Jonathan Gain – our podcast professional of the week.

Although formed without Covid 19 in mind, Jonathan recognised what he calls an Inheritance Economy – the transfer of wealth over the next thirty years of £5.5 trillion. This succession of wealth, he sees, as an opportunity – and if it was an opportunity in 2007, how much more is it now, as we head towards rising taxes?

Of most concern to those expecting to inherit is the 40% of tax on the transfer of wealth on death – inheritance tax. Of course, there are reliefs which most of us know about.

The three best known reliefs are outright gifts made more than seven years before death, gifts to a charity and gifts to a spouse. But what if you don’t want to make gifts now – for fear of living longer than the means you have retained – or you do not have a spouse?

One much overlooked relief is Business Relief – which works be reducing the value of what is being transferred on death by as much as 100%.

Furthermore, this relief does not have to be claimed – ie it does not work by paying the tax first and then claiming it back. It is available immediately since the value which is entered onto form IHT 400 when obtaining probate is accompanied by a Schedule IHT 413 which determines whether a business or project qualifies for the relief and if it does the value of what is being transferred and taxed is reduced by up to its entire value – with no tax to pay upfront!

Stellar is not a tax advisor; (whereas GFOS is!) it is an investment manager – but rather than specialise in listed securities it is a specialist in identifying good business projects and companies which qualify for Business Relief and which could also provide the investor with reliefs from other taxes as well, depending on how the investment is structured.

Business Relief is a relief from Inheritance Tax on all unquoted businesses and in businesses listed on AIM which qualify. These businesses must trade but provided they satisfy the criteria can be substantial. However, Stellar is of the opinion that there are many undervalued businesses of small to medium size which are below the radar, and which can deliver, if chosen wisely, excellent returns.

Projects such as the development of hotels and golf clubs can also qualify and have the added advantage of being asset backed.

Although companies quoted on AIM, unquoted businesses and development projects are considered by many to be risky – with an experienced investment manager and a wide diversification they can produce exceptional returns, and given the low rates of interest and turbulent trading conditions we have had over the last year that begins to look attractive despite the obvious benefit of tax reliefs.

Of course, there is always the danger that the Chancellor will, in due course try to clip the wings of the entrepreneur, but as I said earlier, he would be unwise to cut the benefits of the entrepreneur too severely for fear of biting off the hand that feeds it.

However, it has to be said that we have already seen him reduce Entrepreneurs CGT relief from £10million to £1million which to my mind is short-sighted, so we cannot rule changes out, but Sunak also needs reminding that he needs to keep his own loyal voters onside and be reminded how little this relief really brings into the Chequer in comparison to the big three revenue generators; income tax, VAT and national insurance.

But, Inheritance Tax, for those wealthy individuals who do not wish to give it all away before they die is a very expensive tax indeed at a rate of 40% of the CAPITAL transferred, so well worth looking into in 2021!

At this point may I say that 2020 is drawing to a close so we will not be publishing a newsletter until 2021; on 12th January 2021, when I will be kicking off the year with some new year’s resolutions on how to network efficiently and effectively without wasting time and money

My research and experience has led me to create Caroline’s Club which enables you to network without going to conferences, without wasting time listening to speeches and where you do not need to collect business cards – because all the details have already been captured for you.

At Caroline’s Club we create audio brochures – about who you are and what you do in our podcasts and encourage our members to share Client Stories in our zoom meetings.

There are also lots of new ideas which we are working on in conjunction with our Private Client Professional Members which we will introduce to you over the forthcoming year

If you would like to serve your clients better and network more effectively and efficiently join Caroline’s Club, simply register and sign up to our Client Stories Zoom meetings on https://carolines.club.

In the meantime, whoever you are and whatever you do for your clients – have a relaxing and enjoyable break – to start 2021 with confidence - whatever it holds in store

Best wishes – see you next year!

Weird, isn’t it?

A client of mine, Jennifer – not her real name, is married to an African gentleman and has lived abroad for 28 years. Last month her father who lives in England where Jennifer was born and brought up, died of Covid – 19. It was very sudden and unexpected.  Jennifer came to London for the funeral and to sort out his estate with my assistance; her father was a widower.

Jennifer and her husband are entrepreneurs and have built a substantial fortune across the globe, as well as many personal lifestyle assets such as a home in New York and an apartment in Singapore where they have business connections

During a zoom call Jennifer asked whether she should make a Will now that she had inherited her father’s home in Wimbledon and most of his assets. Jennifer was his only child. Of course, she should make a UK Will but there were much more serious consequences to consider

Jennifer had been born and bought up in the UK, the UK tax authority on her death would probably question any attempt by her executors to claim that she was not taxable in the UK on her world-wide estate on her death. Jennifer was aghast ‘Don’t be silly’ she said ‘I have been out of the country for 28 years, there is no way I am going to pay tax to the UK government on my non-UK investments …’

I gently pointed out to Jennifer that she would not be there to fight her case against the UK tax authority; HMRC, and it had a lot of case law to use against her Executors when the time came as ammunition to argue it’s case that her entire estate should suffer UK tax at 40% or whatever rate was current at the time.

Being subject to UK ‘Inheritance Tax’ on your world-wide estate depends on an ancient concept called ‘domicile’ which is a very different to the concept of ‘residence’.

Residence depends on how long you stay in any one country; domicile is more to do with which country you treat as ‘home’ regardless of where you actually reside – or live.

There are several types of ‘domicile’ but the most important two types for Jennifer are ‘domicile of origin’ and ‘domicile of choice’.

A domicile of origin is acquired when an individual is born (Henderson v Henderson 1967). Where the individual is legitimate the domicile of origin is generally the father’s domicile at the date of birth.

Clearly at the time Jennifer was born, she was born legitimate and her father’s domicile was the UK where he had lived all his life.

A domicile or origin will continue until the individual acquires a domicile of choice.

A domicile of origin is considered by the UK courts to be very ‘sticky’ and will pop up again as soon as a domicile of choice is abandoned (Winans v IRC 1904).

The significance for Jennifer is that if her executors, when obtaining probate of her UK assets on her death, cannot prove to HMRC that she has acquired a domicile of choice in another country it will seek to tax her world-wide estate to 40% or whatever is the rate then

The intention to acquire a domicile of choice and to abandon the domicile of origin has to be ‘clearly and unequivocally proved’ (Moorhouse v Lord 1863)

The two requirements to establish a domicile of choice are that the person must live in the territory and must have formed the intention to reside in that territory permanently or indefinitely.

The length of time spent in another country is not determinative. In the case of Udney v Udney (1869) a period of non-residence of 32 years was not enough proof to show a permanent and settled intention not to return to the country of domicile.

If a person intends to return to his country of origin on a contingency the requisite intention to remain permanently or indefinitely in the territory, that person lacks the requisite intention.

If, by keeping her father’s home in Wimbledon, she is ‘keeping her options open’ to return to the UK on the death of her husband – it is unlikely that she has formed the intention to reside in Africa permanently or indefinitely which could mean that her world-wide estate will be subject to UK tax.

The story of Jennifer is very sobering for anyone who was born and brought up in the UK, but retains investments in the UK and my strong recommendation is to seek advice before HMRC starts digging on your death.

If you have a Client Story which you would like to share with our Private Client Professionals simply register your interest with Caroline’s Club https://carolines.club

At Caroline’s Club we aim to make networking more effective and efficient. Gone are the days when you need to sign up to an event spend the day travelling there and back, sit through irrelevant speeches and collect business cards through the ‘break out’ opportunities.

At Caroline’s Club you do not need to listen to speeches or meet face to face. All you need to do is to create your audio brochure on a Caroline’s Club podcast and to share Client Stories with other Private Client Professionals on zoom calls - easy

If you would like to network more effectively and efficiently join Caroline’s Club, simply register and sign up to our Client Stories Zoom meetings on https://carolines.club.

Inspiration

Milica Kennedy Kastner has authorised me to speak candidly about her and her situation. Milica is ill, very ill, but she is also remarkable in the face of death and her story is to be featured in the Tatler in January. But she is not being featured for the tittle tattle which has surrounded her life - she will be remembered –for her inspiration  

Milica is the daughter of the world-famous film producer Elliott Kastner, who is best known for his film Where Eagles Dare. She was brought up in Hollywood surrounded by household names such as Paul McCartney and Rudolph Nureyev

Her mother is the glamourous Tessa Kennedy who was a renowned interior designer to the rich and famous. Tessa’ mother was a great beauty and was known as the Pearl of Dubrovnik. Her best friends were Prince Rainer and Princess Grace of Monaco who she would visit regularly with her children.

Tessa shot to fame as a teenager when she eloped aged 18 to Cuba where she got married. Her father made her a ward of court to get her back and the scandal hit the press!

There is nothing ‘ordinary’ about Milica and her family!

Milica’s godfather is the King of Jordan, who she spent a few days with, in the Summer and her godmother is Joan Collins – who she had lunch with last week – everyone wants to see Milica – she is so ‘bonnie’.

She even spent some time with Deborah as they were travelling together on the tube. Milica entertained her (and indeed the whole carriage) with her story of how she and Robbie Williams had formed a pact that they would be married if they had not found other partners by a certain age. She has asked Robbie to sing at her funeral and he has accepted!

Milica has been diagnosed with stage four cancer. She has had 60% of her liver removed, a tumour the size of a golf ball taken out of her brain, her uterus is gone, and she has had umpteen operations on her lungs.  But through it all remains true to herself – simply incredible!

This is not a story of hope – her prospect of living to see her teenage daughter go down the aisle or her son aged 16 play professional football seems unlikely

It is neither a story of despair, she is not angry at God – for cutting her life short at 48, she does not fear death – “Just think - I won’t have to worry about silly little things anymore!”

She is not in denial, either– which is why Milica and I have been able to make such rapid progress in sorting out some complex financial matters with her siblings in the US as well as in London.

Milica does not worry about death she says ‘I am not the Director of this show. It is not up to me when the curtain comes down – so why worry?’

All of us are vaguely aware that one day we will die – but most of us are in denial – not Milica. ‘I am so fortunate’ she says ‘I know that I am going to die – so I spend time with my kids, my friends and my family. Just think how awful it would be if I just keeled over or was hit by a bus – with no time to make plans, or to spend time with my loved ones’

‘We all hide behind silly masks – concerned what we look like, what people think of us, and wanting to do the right thing. It is all so stupid.  I wanted to drop my masks, be the real me and much to my surprise people respond so positively’.

Milia does not feel she needs to wear a wig – she has a great shaped head. ‘To begin with I felt ashamed of my bald head, but then realised that it was great not to have to wash and style my hair everyday – and to feel the breeze on my head’.

Everyone is inspired by Milica; for example, she never forgets to ask, ‘How are you?’ which is a remarkably challenging question when asked by someone who is at death’s door. All concerns and worries seem so trivial and stupid – by comparison.

Each day she is thrilled to be alive, she is full of gratitude for the love and warmth her friends and family have poured upon her – and she deserves it – she is an inspiration to us all – and not just for those of us who are not familiar with disease and death

Last winter she went with her kids to the Somerset House ice rink. On the rink was one of her oncology nurses who made a beeline for Milica – ‘I just wanted to say that at the hospital we believe you were God sent, to inspire us how to live every day at a time’ which is precisely what she does.

Last week I shared Milica’s story with other Private Client Professionals on our Coffee with Caroline Client Stories Zoom call.

If you would like to serve your clients better and network more effectively and efficiently join Caroline’s Club, simply register and upgrade to join our Client Stories Zoom meetings on https://carolines.club.