Offshore bonds for university fee provision?

As my 16 year daughter gaily announced that she’s found another University near London that she might like to try, it did strike a chord that the financial burden for children goes way beyond standard school fees.

You could argue that the cost of children never diminishes or goes away completely, but that’s another argument for another day.

Whatever the eventual cost and in whichever location, having funds available to help ease the pain is the thing to do.

There are a number of ways to plan for further education fees; using the maximum ISA allowance each year, savings accounts, collectives and even using tax free cash from pension can all play a part.

I’d like to focus on how an Offshore Bond could be a vital addition to your further education fund armoury.

As I touched upon in a previous blog, the tax regime in the UK is punitive and using the tax free growth status of an Offshore Bond to provide fees by way of assignment to a non-UK taxpayer (like a Student) is worthy of consideration.

The Offshore Bond also has further advantages over other forms of saving in as much as there are no upper contribution limits (like an ISA or pension), access at anytime and a wide range of investment options which can include our Dimensional run passive portfolios.

A higher rate tax payer can take advantage of tax free growth offshore and potentially could provide annual University fee help to their children by then assigning policy segments to them. Providing the recipient is a non-taxpayer, there will be no tax to pay.

Care needs to be taken when accessing benefits from an Offshore Bond if you are a higher-rate taxpayer and I would discuss this in more detail in individual cases.

Add the ability to take tax deferred income for 20 years and a range of Trust options, then the Offshore Bond is a very handy addition when considering funding for further education fees.

This is a very brief introduction to the concept of Offshore Bonds and I would be happy to discuss this subject or any other of your financial planning needs at any time.

Roland Oliver


Taking the active vs passive debate a stage further

When I explain to clients and other industry professionals that our investment philosophy is passive, I usually get the response “So you just use index tracking funds and don’t bother changing things if market conditions alter?”

This usually has the initial effective of getting my blood pressure up then once I’ve calmed down, I try to give my more measured, rational explanation.

So, I’ve laid out my thinking behind the philosophy that drives our passive investment strategies and why we use Dimensional Fund Advisers to create our risk-based portfolios.

Market efficiency and its offspring, passive investing, are counterintuitive for many investors. It is human nature to believe that you can beat the market (or identify someone who can) through intelligence, insight, and hard work. This belief is constantly reinforced by the City and most of the mainstream media. Yet even when you are able to firmly plant the seeds of information to overcome those beliefs and intuition, a passive investment approach may carry the negative connotation of inactivity if not properly explained.

Although Dimensional Fund Advisors are characterised by some as passive, it is only passive with respect to activities that don’t add value—mainly stock picking and market timing. You could argue that Dimensional is very active, however, in managing important considerations such as costs and consistent exposure to targeted risks or asset classes. With this in mind, I don’t think the categorisation of “passive” or “active” investing is as black and white as some suggest.

Here are some of the philosophies we share with Dimensional that may better explain the subtle differences.

Don’t speculate. Invest.

Rather than relying on speculation, blind faith, or anecdotal evidence, our philosophy rests on a solid foundation of core principles from the science of investing.

With capitalism there is always a positive expected return on capital.

Capital markets are very competitive due to voluntary exchange between buyers and sellers. There is a buyer for every seller; for markets to clear, prices will adjust to new information and reach a level where there is always a positive expected return to providers of capital. Investors would not risk their capital without the expectation of a positive return. We believe in Dimensional’s approach because they invest in a way that strives to capture a fair share of the capital market return based on the risk assumed.

It is difficult to identify superior investment managers in advance.

Capitalism breeds competition, and that makes markets difficult to beat. With millions of participants competing in capital markets, it is hard to identify in advance anyone who can systematically beat the market since past winners may have just been lucky and won’t necessarily win in the future. We believe in Dimensional’s approach because it eliminates the risk of choosing the wrong manager by following a broadly diversified approach that does not rely on stock picking or market timing.

Diversification is the only antidote for uncertainty.

Although diversification neither assures a profit nor guarantees against loss in a declining market, a properly constructed and well-diversified portfolio is a key component of a successful investment experience. Again, we believe in the Dimensional approach as they design portfolios that attempt to capture certain risks and eliminate others, depending on your preference and capacity for various types of risk.

There is no free lunch. Risk and return are related.

Higher expected returns only come from bearing more risk that cannot be diversified away. Much like a racing driver who chooses to drive without a helmet, you should not expect to be paid more for taking risks that can easily be avoided. Our approach at Oliver Asset Management focuses on eliminating risks that you should not expect a reward for taking, such as concentrating your portfolio in just a few stocks.

Control what you can.

If speculation is futile, and trying to choose winners is more often a loser’s game, what can an investor do? The answer is to concentrate on what can be controlled: managing the transactional costs of investing, reducing the impact of taxes, and taking a long-term view. Above all we approve of Dimensional’s approach because they implement portfolios in a way that is cost effective, tax efficient, and above all, disciplined.

Market efficiency and the active or passive decisions are loaded with misconceptions that can lead to debate and confusion rather than constructive dialogue and understanding. More importantly, it can distract our attention from the most crucial element of all: discipline!

It is this discipline that is one of the key advantages to having a good Wealth Manager. If part of the recipe for a successful investment experience is to stay the course, we can provide that key ingredient of educating you in these philosophies and keeping you disciplined through good times and not so good times.

The whole approach described above is our fundament investment belief at Oliver Asset Management and it’s a subject that I will continue to bring more information to you on in the coming weeks and months.

Roland Oliver


Working for the Government?

I had a friend that years ago had worked out that with his given rate of tax and National Insurance, he was effectively working for the Government until mid afternoon on a Tuesday before he made any money for himself.

Given our current levels of tax, I wonder what he’d make of things now?

He could well be working until late Thursday with top rates of tax being 50%.

We know that reducing the tax burden is one of the 5 key concerns of our clients and that this has never been more acute. I hear from people on a daily basis that they are looking for ways to pay less tax.

Interestingly, they always want to look to the esoteric methods rather than the tried and tested.

So please speak to your adviser and make sure you’re maximising your ISA allowance, pension contributions, CGT annual exemptions, IHT allowances – use a relevant life policy through your limited company if your able and save corporation tax on your life cover premiums.

If you want more, then certainly look at the improved tax breaks Venture Capital Trusts & Enterprise Investment Schemes offer since the last budget (be well aware of the higher levels of risk that might be involved here.)

In short, pay your tax but make sure you take full advantage of the ways you can pay less.

I’ll be discussing the ways you can use financial planning tools to save tax in more detail in the coming weeks.

Call me anytime to discuss this further or any other aspect of your financial planning needs.

Roland Oliver


Our New Website

It’s really exciting to be writing my first blog for our new website. It’s taken a long time to get here but it’s been the right journey and I truly believe we have a fantastic Wealth Management experience finally in place.

At Oliver Asset Management we believe that putting the client at the head of any relationship is core to what we do.

It certainly appears to me that the genuine lack of true customer focus has become the norm and that people are resigned to a world of rules and regulations designed to hinder, confuse and frustrate.

Our banking system continues to struggle to regain customer confidence and I think it will be a while before “Customer Charters” and slick advertising slogans cut any real mustard with the general public.

People are savvy to when they are being spun a yarn and it’s high time our service industry woke up to this fact.

I believe people want to be treated fairly, with respect and to have things explained to them in an honest and straightforward way.

I also believe that people are happy to pay well for a good job and that if they get an exceptional experience, they’ll want to repeat it and tell their friends.

Our new website sets out our whole new process and our Wealth Management Formula but at the heart of all we do is a complete focus on ensuring you the customer have an exceptional experience and that you’ll be delighted that you entrusted us to help guide your financial plan for the future.

That’s the first of many blogs I’ll be getting out there but it’s a common theme that I’m sure that I’ll return to time and time again.

I’ll have comments weekly so do check in on a regular basis and give me a call anytime and see how we can help you personally.

Roland Oliver