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The following is a real-life case study relating to one of our clients (a pseudonym has been used).

Our client, Mrs Murray, was introduced to us in 2010 by her sister-in-law a few months after her husband had passed away. At the time, she was age 44 and had three children aged 15, 13, and 11. She had not been actively involved in managing any of the family’s finances.

Background

When her husband passed away, Mrs Murray was left with a relatively substantial pot of assets. However, she had not actively been involved in any of the family’s financial affairs and she was unsure of how she would use the assets to support her children through their education or herself into and through retirement.

She was concerned with both generating a monthly ‘income’ from the assets to cover ongoing expenditure, but also ensuring that there would be ‘capital growth’ on the assets so that she would be supported by them into her retirement.

At the time, the assets were held with various investment providers and insurance companies, but she also had a dusty box of over 100 share certificates that had been accumulated over the previous 20 years.

She also had a large cash sum; however, deposit interest rates at the time had reduced to just 1%, which meant holding such a large cash sum was not financially advantageous.

There were numerous unanswered questions about investment risk, cash-flow planning, and the necessity to generate an income with interest rates at new lows. At the same time, Mrs Murray was concerned about ensuring that she and her children would be adequately provided for in the difficult years after her husband’s death.

Solution

Saunderson House established contact with her 13 existing product and investment providers, and also established the value of the 35 companies whose shares she held across over 100 certificates.

Products had previously been held individually and jointly and were therefore governed by ‘differing’ tax rules and treatments, various charges from legacy adviser commissions, as well as quite punitive surrender penalties, all of which we needed to untangle for Mrs Murray.

The shares had to be split into different groups depending on their tax treatment – the original share owners, the expected gains and any tax consequences of selling the shares or deferring their sale to a subsequent year.

We established which of her various investments it made sense to retain, which should be sold or surrendered, and how the recommended actions would be treated for tax. We also laid out clearly how she could generate sufficient monthly income from her portfolio to provide for her family.

Lastly, we guided Mrs Murray as to the right level of investment risk she should adopt with the invested assets, in order to balance her immediate need for income with the longer term aim of ensuring she has sufficient funds for her retirement.

Results

We reduced the administration of the portfolio considerably, most notably by removing the need for Mrs Murray to retain the shares in certificated form, but also unravelling some of the unnecessary tax structures she had in place.

We established a monthly income from the portfolio, meaning that she has at present sufficient day-to-day funds to provide for her family.

We compiled a detailed, long-term cash flow forecast, using agreed and relatively conservative assumptions for spending, inflation and growth, giving her peace of mind that she should have sufficient assets for her immediate income needs, but also enough to provide for her retirement.

Seven years on, the portfolio has grown at a steady, compound annual return of c6% and we will soon be looking to help Mrs Murray plan for making gifts to her eldest child to help him onto the property ladder once he has graduated from university.

About The Author

Simon Maydon
Simon’s specialisms centre around pensions and investments, financial protection and long term tax planning. His clients are largely made ...
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