10 Predictions for the Future of UK Financial Planning

1. Robo Advice may not succeed.

There has been a lot of press coverage about Robo Advice. The UK financial services industry is seen as one to the best regulatory frameworks globally. However, it is difficult to see how Automated Advice can be integrated into the current financial Framework. Whilst helpful Robo Advice will not come without risk. The UK regulator has already confirmed that they expect Robo Advice to comply with current advice requirements. I am sceptical it will become a mainstream advice option.

2. No opt out for Auto-enrolment

The UK is facing a pensions time bomb, with people not saving enough for retirement, living longer and the closure of many financial salary pension schemes. I believe the government will eventually be forced to abandon the opt out options for workplace pensions.

3. Cost of Regulation will not reduce

The recent Financial Advice Markets Review covered access to financial advice and the cost of regulation. Although certain sectors of the UK financial service industry may see a fall in the cost of regulation, overall the total cost to the UK will not reduce.

4. Greater access to financial advice

Product innovation and simpler packaged products will become more mainstream. Whichever government is in place the need to encourage people to save rather than spend will become a priority in years ahead.

5. Face to Face Advice preferred option

Face to face independent financial planning will still be the preferred option. People still like to deal with people and although the use of technology will improve the consumer experience, human interaction will still be preferred.

6. Financial Awareness will improve

Education in schools on financial awareness will continue to improve. Eventually it might even become part of the curriculum. Hopefully as financial education become part of the learning experience the UK population will become more financially aware.

7. Money Advice Service review

The Money Advice Service will come under increasing pressure to demonstrate value for money and to show it is improving the financial awareness of the UK population. So far it has failed and it is unlikely to survive in its current format.

8. Product innovation

The industry is adept at developing products to sell to consumers. This has been the case for a long time and will continue to be so. Whether these products will offer value to consumers is another discussion. Consumers need access to simple low cost products and financial advice.

9. Annuities will become popular again

At the present time we are in a low interest rate environment. However, at some point interest rates will normalise, along with Gilt yields. If and when this happens annuity purchase will become more popular again. Now that pensions freedom is over a year old, we are already seeing a slight increase in the number of annuities being purchased.

10. Long Stop will be introduced

The recent Financial Advice Markets Review (FAMR) rejected the introduction of a fifteen year long stop for Financial Advisers. Continued pressure will eventually force the regulatory body to review this although this might not happen for a long time.

These predictions are only my own personal opinion on how the UK financial planning industry might develop over the next few years.

Estate Planning With IRAs – Building a Nest Egg That Won’t Crack

It never ceases to amaze me how many people don’t take advantage of the generous benefits of estate planning with IRAs. Since 1954, the U.S. government has made it possible for people to open IRAs…or Individual Retirement Account in order to save money, build wealth and enjoy a break on their taxes…all at the same time. And the versatility that is built into these retirement savings plans means that an individual has a wide range of options for building a nest egg that won’t crack.

Estate planning with IRAs may sound a little fancy, but anyone who earns a taxable income during the year can participate. You just have to decide which type of IRA is best suited for your personal financial situation, goals and needs. Here is a brief description of each IRA option.

Traditional IRA

In 2008, if you are under 50 years of age, you can contribute up to $5000 to a traditional IRA*. Your contributions are deducted from your taxable income for that year. Earnings made by the IRA are tax-deferred until they are withdrawn at retirement. At that time regular taxes would be due on any disbursements taken. Persons over the age of 50 can contribute up to $6000, with the same taxation rules.

Roth IRA

Contributions made to a Roth are also limited to $5000 for people under 50**. However, these contributions are made from earned income that has already been taxed. Furthermore, you are not allowed to deduct the contribution from your taxable income. The benefit from estate planning with IRAs of this type is that you would never be required to pay taxes on the profits earned with this plan. This means that when you reach retirement, you can withdraw up to the total amount of your contributions plus your earnings without having to pay taxes.


This is basically a Traditional IRA made available to self-employed individuals, and small business owners. For 2008, the maximum amount that can be contributed to a SEP plan is 25% of an employee’s compensation, which is capped at a maximum of $230,000 (25%= $57,500). Taxation rules that apply to a Traditional IRA also apply to a SEP/Solo IRA.

Simple IRA

If you want to do estate planning with IRAs through your employer, than a Simple IRA would be an option. Similar to a 401(k) plan, a Simple IRA allows both the employer and the employee to make contributions. Contributions to a Simple IRA have lower limits, but taxation rules remain the same. Employees may also be subject to meeting specific enrollment qualifications.

Self-Directed IRA

When it comes to estate planning with IRAs, a Self-Directed IRA offers you more flexibility and control over the types of investments you want to make. This is the “best of both worlds” for people who want to manage their own investment portfolio, but receive custodial assistance with record keeping, required report generation and federal regulation compliance. There are managing company’s that specialize in this type of financial service. With the Self-Directed IRA you have the option of setting up either a Traditional or Roth IRA. The same funding and taxation rules apply.

Now that you know all this, what’s stopping you from taking a simple step to make your money really work for you? The versatility, benefits and incentives for building a nest egg that won’t crack are just too good to pass up. There are plenty of expert financial advisors you can consult to help direct you toward a plan that can meet your goals and needs. If you’re interested in building wealth for retirement while saving taxes, then estate planning with IRAs is the way to go.

*Maximum contributions are subject to change from year to year.

**It is permissible to own both a Traditional and Roth IRA but the total combined contributions cannot exceed $5000 ($6000 for persons over 50).