How a planner and solicitor collaborated to create a ‘family office’

Posted 29 May 2024 by Harry Sims

In this article, Harry Sims, Chartered Financial Planner at Fairstone Group, and Michael Romain, solicitor at Bishop and Sewell, explain the key benefits and opportunities of working together to deliver something akin to a ‘family office’.

Harry begins by explaining the background to the collaboration:

The potential for collaboration between financial planners and solicitors is huge; for Fairstone, it plays a pivotal role in delivering a holistic and integrated service to our clients. From Michael’s point of view, his team can provide specialist advice that (due to legislation or lack of expertise) they can’t give but want to facilitate on their clients’ behalf.

This relationship, often likened to a 'family office' model, not only ensures seamless coordination, but also maximises the benefits and outcomes for our mutual high-net-worth clients – it’s a one-stop shop!

The history

Michael and I began working together last summer, with the objective of being able to refer work and establish a robust strategy for servicing our clients’ legal needs. But we wanted to develop a collaborative, joined up approach rather than a transactional one.

To begin with, we immersed ourselves in workshops and development meetings so we could gain a deeper understanding of each of our fields and identify specific scenarios or needs that might prompt a referral for advice.

We soon found there were several jumping off points that worked well for a mutual service:

Planning opportunities

Collaboration in complex financial situations: This includes scenarios that involve intricate trusts and estate planning. Financial planners can play a key role in estate planning, especially when using Business Relief assets as part of the overall IHT strategy (this includes large settlements into discretionary trust funds and mitigating a Chargeable Lifetime Transfer charge).

Cashflow forecasting: Cashflow forecasts are imperative for visualising future financial standing and projecting where clients will be in 30 years, whether for accumulation or deaccumulation. This tool not only helps clients understand when they can achieve financial freedom, but also illustrates the impact of monthly savings, lump sum investments, or adjustments to their risk profile.

Pension nominations: Many may overlook the fact that old pension plans may automatically pay death benefits only as a ‘return of fund’, potentially resulting in a 40% IHT charge on the second death of an estate (assuming the pension is paid to the surviving partner in cash, not in a pension fund form i.e. return of fund). It’s extremely important to note this, as many automatically assume pensions will be outside of the client's estate. Solicitors need to be aware of this when assessing clients’ finances and drawing up wills, for example.

Michael explains the opportunities for referrals from his side:

Life events and the need for a will: We recommend that all potential clients have a will regardless of life stage, but there are times when a drafting a will is particularly encouraged and can be referred, for example in the event of marriage, having children or divorce. As a general guidance point, we recommend clients review their wills at least every five years, or when a significant life event occurs.

Lasting Powers of Attorney: Lasting Powers of Attorney are important documents that allow chosen Attorneys to manage a client’s affairs should they become incapable of doing so themselves, for example due to mental or physical incapacity. If a client becomes incapacitated without a Lasting Power of Attorney in place, lengthy applications to court will be required for their loved ones to gain control and manage their assets.

With a Lasting Power of Attorney in place, continued management, financial planning and succession planning can continue relatively unhindered (within the constraints and duties imposed upon Attorneys) even after the client has lost capacity. As the loss of capacity can occur at any age, we recommend our fellow professionals to encourage their clients to implement Lasting Powers of Attorney as soon as possible. They’re like an insurance policy; you hope you never have to use them, but you will be glad you made them if the needs call for it.

Lifetime gifting to individuals or trusts: A typical client will approach us for advice on IHT, and how the overall liability charged to their estate on death can be reduced. While we can explain the methods of reducing one’s estate, for example by lifetime gifting to individuals or into trust or utilising the Normal Expenditure out of Income rules, we would always recommend a financial planner be involved so they can enhance the advice we give provide. This is often done by assessing the amounts the donor requires to live within the means they desire, as mentioned in Harry’s section above on cashflow forecasting.

As the client relationship deepens, regular meetings will continue to occur between us both. We’ve structured factfinding meetings to align financial strategies with legal frameworks, ensuring a comprehensive approach to wealth management — which, I would argue, is our duty.

In the later stages of the client journey, the collaborative effort intensifies to ensure seamless wealth transfer and adherence to legacy intentions.

In conclusion, the referral dynamics and ongoing collaboration between financial planners and solicitors epitomises the essence of a 'family office' service. Naturally we have adopted a ‘united front’ approach with our mutual clients, to make the referral from one professional to another a simple part of the overall planning process, with everyone pulling in the same direction. This integrated approach not only optimises outcomes but also establishes relationships founded on trust, expertise, and shared commitment to client success.

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Harry Sims

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Harry Sims