1. With our research partners...
Adviser Research
[2013]
Offshore Investing for UK Investors

2. Foreword With all best wishes for your success. Tony Wickenden
Throughout 2012 advisers, financial product providers and platforms will have been considering, constructing and refining their business models in readiness for the full implementation of the RDR in 2013.
Four months in it is clear that the delivery of a full advisory service by many advisers will only be feasible for clients on higher incomes and/or with substantial amounts (e.g. £100K-£150K
plus) to invest.
For these clients, having access to a full range of underlying investments and a full range of product wrappers UK and offshore to construct the financial plans that investors will want and demand will be essential.
With the fundamental change to the way advisers are remunerated (via adviser charging) and the inexorable advance of investment platforms we believe that now represents an excellent time to find out what key investments advisers think about the on and off platform role of offshore bonds and offshore funds (reporting and non- reporting) together with offshore pension arrangements such as QNUPS and QROPS in the creation and delivery of effective financial planning strategies.
This quarter’s Adviser Business Insight looks at who advisers do (and want to do) business with and considers the use and potential use of offshore products in a range of highly relevant contexts including:
With all best wishes for your success.
Tony Wickenden
Jt .Managing Director
Technical Connection limited
Phil Wickenden
Managing Director
So Here’s The Plan limited e: m: e: m:

3. Objectives
Our research sets out to explore the challenges and opportunities in offshore investing for – looking at the planning opportunities from offshore bonds and offshore funds, together with offshore pensions arrangements like QNUPS and QROPS.
Speaking to advisers at length we have explored in detail:
Offshore solutions and the facilitation of adviser charging – the story so far;
The tax implications of facilitating adviser charges through products;
Perceived relevance and importance of offshore solutions for various client groups, including expected change and drivers thereof;
The extent to which offshore bonds and funds are written on / off platform and how this may develop over time;
Perceived value of multi-currency investment;
The benefits and challenges of doing more offshore business;
Typical profiles of offshore bonds / funds being written;
How the offshore bond / fund market will develop;
Perceived leading platforms / providers in relation to offshore bonds / funds;
Current and future relevance of offshore protection plans, QROPS and QNUPS, including attitudes, perceptions and use of plans;
Perceived ‘go-to’ platforms / providers for offshore products;
Levels of use and experience of platforms / providers in relation to offshore products; and
Required / desired market developments (product / service / support). 3 3

4. Methodology
100 advisers were randomly sampled from a robust panel of 800 Technical Connection adviser clients and over 10,000 advisers from So Here’s The Plan’s growing database.
The sample comprised advisers who were:
Nationally representative sample of nationals, networks, regionals and single outlet firms
From fee charging businesses
Active (or actively planning to be) in offshore investment
All interviews were conducted by telephone, lasting minutes on average.
Participating advisers were offered access to online client facing material from Technical Connection in return for their participation.
Individual anonymity agreed. 4 4

5. Respondent Profile
Q. Have you written any offshore business over the last 12 months or do you think that you will likely do so over the next twelve months?
Q. And could you please confirm whether your business is…?
Advisers were screened to ensure the majority were already active in the offshore market (82%). A further 18% were not yet active, but planning to be over the course of the next year.
Reflecting the profile of IFA businesses across the UK, the majority of those interviewed were from a single office business (65%). Around one in five had a regional presence or was part of a network, while 8% were from a national IFA. 5 5

6. Consultant capability
Contents
Section 1: RDR & Adviser Charging
Section 3: Offshore Bonds
Section 5: QROPS & QNUPS
1.0 Key take-outs
1.1 Facilitating the payment of adviser charging
1.2 Provider / platform helpfulness
1.3 Influence of helpfulness on solution selection
1.4 Tax implications of charging through products
1.5 What good (process and support) looks like
1.8 Implications and opportunities
2.0 Key take-outs
2.1 Offshore business placed (now vs. expected)
2.2 Drivers of change
2.3 Offshore client profile (UK based vs. non- UK based / UK Dom vs. non Dom)
2.4 Offshore business breakdown %(bonds / funds / QROPS / QNUPS) and expected change.
2.5 On platform vs. off platform use (and drivers of selection).
2.6 Offshore platform use and reasons for use / non use
2.7 Importance of various offshore solutions for various client segments (individual / trustee / company)
2.8 Perceived relevance of various offshore solutions (bonds / funds / QROPS / QNUPS) and expected change.
2.9 Multi currency use
2.10 Opportunities and threats for offshore markets
2.11 Implications and opportunities
3.0 Key take-outs
3.1 Average size of bond and jurisdiction preference
3.2 Key features and drivers of importance
3.3 Offshore bond appeal – the changing landscape
3.4 % of bonds held in trust and trust preferences (Discretionary / DGT / Will / Bare / disability / absolute)
3.5 Use of tax efficient withdrawal / encashment / exit strategies in relation to offshore products
3.6 Offshore bond strategy importance
3.6 Best in class for Offshore bonds
3.7 Implications and opportunities
5.0 Key take-outs
5.1 Current use of QNUPS / QROPS and expected change in use in relation to lump sum IHT planning
5.2 Why advisers use & don’t use QNUPS / QROPs
5.3 Expected market change
5.4 Most important contributors to the risk and opportunities for the use of QROPS and QNUPS
5.5 The value of support / training for QNUPS and QROPS
5.6 The importance of QROPS / QNUPS for adviser independence
5.7 Implications and opportunities
Section 2: Offshore Market
Section 4: Offshore Funds
Section 6: Provider & Platform Support
4.0 Key take-outs
4.1 Typical offshore fund investment
4.2 Reporting funds vs. non reporting funds % split
4.3 Key drivers of fund selection
4.3 Importance of offshore funds in relation to implementing tax planning strategies for investing clients
4.4 Best in class providers / platforms for offshore funds
4.5 Implications and opportunities
6.1 Key take-outs
6.1 Preferred destination and best in class (Offshore bonds / funds / QNUPS and QROPS)
6.2 Drivers of selection
6.3 Best in class for support and drivers:
6.4 Full provider / platform ratings across each
6.5 market development imperatives
Technical support
Consultant capability
Web content
Business generation
Seminars
Administration
Expertise
Innovation

7. Section 1.
RDR & Adviser Charging

8. Provide & Platform Support
Section 1: RDR and Adviser Charging
RDR & Adviser Charging
Offshore Products
Offshore Bonds
Offshore Funds
QNUPS & QROPS
Provide & Platform Support 1 2 3 4 5 6
The ability of providers to be able to facilitate adviser charging through their products is highly important (87% of advisers agree).
This is largely driven by the high proportion of advisers who say their clients prefer to avoid paying fees directly.
As such, perceived helpfulness in this regard has a significant impact (rightly or wrongly) on provider and solution selection.
Axa International have been particularly well received in this respect, with a quarter of all spontaneous association with most helpful provider.
Transact, Skandia (both 16%) Standard Life (13%) and Prudential (13%) also fared reasonably well.
Those that fared well provided a broad mix of communications and support available both online, over the telephone and face to face (which continues to have a disproportionately positive impact on perception).
Though Skandia elicited some positive association they also registered significantly with the highest number of negative associations on account of poor preparedness and communication.
A third of advisers would exclude providers they regard as ‘unhelpful’ in facilitating adviser charging.

9. Imperative / Important
Facilitating the Payment of Adviser Charging 9
Q. How important is it to your business that offshore investment products can facilitate the payment of adviser charges?
The vast majority (87%) of advisers recognise the importance of offshore investment products facilitating payment of adviser charges.
It was noticeable that over a quarter of advisers who felt it was important / imperative indicated that they were influenced by their clients’ preference for advice charges to be taken from the product. This raises questions over the suitability of advice given as part of the advice proposition must necessarily include clear direction regarding the most suitable means of paying for it, taking into account the individual client’s circumstances. Good advice is more than giving the client what they want.
Offering flexibility in terms of how fees can be paid and providing easier, fairer and more transparent ways to pay fees were also important to IFAs, perhaps unsurprising considering the current regulatory backdrop.
% respondents
Imperative / Important
87%
Unimportant
13%
There are three key reasons why advisers believe it is important for offshore products to facilitate the payment of adviser charges, largely driven by client preference:
Among the small proportion who are not influenced by the ability of product to facilitate adviser charging:
Most stated that they tended to charge the client / custodian directly.
There was also anecdotal feedback that 5% withdrawal limits render any charging other than pure fee as sub-optimal from a tax perspective.
Client reluctance to pay fees directly to the adviser (27%)
To offer the client flexibility in terms of how fees are paid (21%)
Easier, fairer and more transparent to facilitate for both IFA and client (15%)
Most of my clients don't want to be writing cheques for fees. “ ” “
To give the client the option how to pay for advisor services. ”
Most of the business that I transact is on direct payment from the client.
We work on a fee basis and can take money from other trust assets or from the bond itself, but we are reluctant to because of the 5% tax. “ “ “
It is difficult for trust related business to facilitate the charge outside of the product. ” ” ” 9 9

10. 10 Provider / Platform Helpfulness
Q. Which providers / platforms have been most helpful in relation to facilitating adviser charging on offshore products? (% of all respondents)
Axa International’s response to RDR has been particularly well received by advisers, with nearly a third of all respondents spontaneously associating the provider as the most helpful in relation to facilitating adviser charging (30% of all advisers and a 25% of all recall).
Transact and Skandia also fare comparatively well (16% of all advisers and a 13.6% of all recall).
Though not charted, it was notable that 18% of all respondents felt that there was no one provider helping to facilitate adviser charging better than others.
Q. Which providers / platforms have been most helpful in relation to facilitating adviser charging on offshore products? (% of all recall)
Cofunds
IFDL
Friends Life
Nucleus
Praemium
Zurich
Aegon
Scottish Widows
Aviva
Axa International 10 10