Year end tax headache? Time to go digital

By Katherine Wilson | 23 March 2018

Financial advisers without a digital solution are in danger of getting left behind.


Regardless of whether 2018 becomes the year of economic correction as some analysts predict, the shift to alternative assets is gathering pace as investors turn to private equity, infrastructure and property in search of better returns. An ageing demographic seeking tax efficient investments further underlines the need for alternative assets to support a more diversified portfolio but allocating to this asset class is not straightforward.

Historically paper based, opaque and difficult to access the process of allocating to alternatives is rapidly becoming out of step in our digital world. Technological innovations have made it easier and more efficient to make these investments and a new wave of platforms are providing fully digitised ways of investing, managing and reporting. These platforms provide greater choice and information to support investment decision making.

For advisers, digitisation is now quite simply a smarter alternative, making it possible to allocate more easily to alternative assets whilst at the same time finding a cure for that tax year-end headache.

Five reasons to go digital

Growing importance

Alternative assets might only be a small proportion of current investment portfolio(s) but assets under management (AuM) are growing at an exponential rate. The need for diversification, yield, growth, and tax efficiency will continue and these asset classes need to be treated with the same rigour as more traditional investments.

Regulatory risk

Regulatory risk is increasing. The implementation of both PRIIPs and MiFID II in January require greater disclosure to enable investors to better understand risk, performance and costs when comparing investment products. In May, regulation will continue as GDPR will increase data security requirements. Advisers need to manage client data in a compliant way and paper based investment, allocation and reporting increases data risk.

Transparency and efficiency

Alternative investments are usually not listed on a stock exchange and involve manual, paper-based application and reporting processes. Allocations made on paper forms and portfolio tracking via an Excel spreadsheet are both time consuming and introduce risk in the form of human error.

Digitisation significantly reduces these pain points. Gone are the days of following separate, paper trails and laboriously updating spreadsheets.

Ease of account management

Digitisation is not just important for managing tax year-end but also ongoing account management.

Advisers can quickly and easily see a detailed, holistic view of their client’s portfolio, including performance information, currency and geographic exposure, plus income and capital gains information. This information can be viewed in real-time by advisers and clients alike, and presents a complete and accurate picture of investments that make it easier to keep track throughout the tax year.

EIS and tax relief investments can be monitored easily without bilateral paper trails with each individual fund manager and funds. With a few clicks of the mouse you can see all investment information including historic investments to help prepare for the tax year-end. It also means enhanced client reporting, with standardised performance information for investments at your fingertips.

Digitisation future proofs and makes investing in the sector more resilient, with a stronger capacity to deal with the norm and also with unexpected trends in the market.

Potential tax reliefs

Enterprise Investment Schemes (EIS), Venture Capital Trusts (VCT) and Business Relief investments (BR) offer a range of tax benefits if held for a qualifying time period. Many adviser firms see these as increasingly important for their ageing client base and digital platforms provide a new, and better, way of understanding this market and bringing these asset classes into mainstream portfolios.

Cure the tax-year end headache

Alternative assets are a serious investment class to be reckoned with; not only can they be tax efficient but they can also provide capital growth and yield. In the quest for better returns in uncertain economic times, allocating to alternative assets digitally is the best remedy for that tax year-end headache.

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