One of the big debates in the world of portfolio management is whether MPS or multi-assets will gain an advantage.
To some extent, given the fact that many investors use tax wrappers in ISA, SIPP or other forms of tax wrapper, we can overdo each other’s tax benefits.
But one area where this is not true is Gias.
In fact, we have almost always had changes to the capital gains tax law, but there are people in investment accounts that are particularly vulnerable to the higher tax rates that occur in April.
Three questions arise. First, how widely these unsecured Gias are spread among advised clients, and how do advisors protect them?
And is this likely to push investors into MPS or multi-assets?
Fortunately, the people at Platforum have slid some data in our way that helps answer these conundrums.
They found 15% of their assets sitting in Gias, but they can also become some of the wealthiest (probably having a good problem after exhausting all the available ISA and SIPP routes).
Simple reminder of the rules: CGT will rise from 10% to 18% of basic taxpayers, from 20% to 24% at a higher tax rate, and further reduce the tax-free allowance to £3,000.
Platforum provided the following graph: This indicates that the advisor is recommending it to GIA clients.
As you can see, Guilt is exempt from CGT for UK investors, so 42% of advisors advocate for switch to onshore bonds.
Keep in mind that maintaining assets with MPS remains a popular solution despite the noise regarding responsibility for CGT through rebalancing.
“Many advisors continue to support their model portfolios, even if they are not the most tax-efficient solution for their clients,” said Analise Toberman, their research director.
“There’s a desire to not let the investment dog rock the tax tail.”
Interestingly, however, the popularity of multi-assets is somewhat underrated by Platforum’s graphs that distinguish between multi-managers and single-managers’ funds.
If these two categories are merged, it suggests that multi-assets could have the advantage, at least in this niche market.
