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Kevin Okell
Death and Taxes
Written by Kevin Okell on
Why do people invest? It’s a question that anyone setting out to deliver a consumer-facing service in the Investment sector really ought to ask themselves. If you based your answer on wealth management press releases, column inches or conference topics it would be easy to conclude that investors are driven by a desire to access risk-rated portfolios, new investment strategies, stochastic modelling tools and clever rebalancing algorithms.

But you would be wrong. The vast majority of individuals in the UK who squirrel away their hard-earned cash are driven by a much simpler motivation; tax. That shouldn’t really come as any great surprise since tax is the main lever governments can pull to drive both spending and saving patterns. The annual ISA rush, additional pension contributions, investment bonds and even the recent boom in solar panel installations are all driven by tax incentives of one form or another.

And with the new pension freedoms which came into effect recently, tax has now become a much more important factor in planning how you spend in retirement as well as how you save for it. That planning can be complex too. Working out whether to take this month’s income as drawdown from my SIPP, “flumps” from my GPP, a withdrawal from my ISA or by selling some of those old BT shares requires in-depth understanding of the tax regime and some serious number-crunching. Just the kind of thing computers are good at.

So, given all the activity around D2C platforms lately, what exciting developments have we seen to help investors with this kind of tax optimisation? Surprisingly little so far. Apart from the odd automated email to warn of an impending ISA deadline, there really does seem to be very little in the way of proactive tax planning in the land of investment platforms.

So far financial planning support in the platform sector seems to have focused on helping consumers work out how much they need to save and where to invest it. In an industry where revenues are driven by assets under administration I suppose that was predictable. But wouldn’t it be nice if your D2C platform could suggest not just where to put your surplus cash but how best to dip into it when you need it. A service that took account of your lifestyle, all your assets and, crucially, the latest tax rules to maximise the income you get from your life savings.

Now that really would be functionality I would pay for. So if anybody out there is working on it, do let me know…

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