OpesFidelio unveils ‘Bond v Platform Spreadsheet’ for its network advisers

Inspired by what they said were “shocking” findings from an internal study of the investment returns that a random group of investors received from “tax-efficient” insurance and Spanish-compliant bonds, investment specialists from the UK-based OpesFidelio advisers’ network have created what they’re calling a “bond versus platform spreadsheet” that they say is designed to help the network’s members fine-tune their advice throughout Europe.

The new OpesFidelio Bond v Platform Spreadsheet, or OFBvPS, allows all investment bonds to be compared against simply holding an investment on a platform and paying tax on gains, according to OpesFidelio officials involved in the project.

The spreadsheet works by enabling advisers to calculate, and thus compare, the returns investors would receive if they directly invested a certain amount on a platform, and if they invested an equivalent sum, at the same time, in an investment/insurance bond – with the taxes and surrender charges that would apply upon withdrawal in both cases, according to the OpesFidelio spokesmen.

A separate sheet has been created to accommodate the specific needs of Spanish-compliant bonds, into which Spanish tax rates can be inserted.

The spreadsheet is currently being rolled out across the OpesFidelio network to its members.

According to OpesFidelio, advisers who wished to make use of their spreadsheet would begin by inputting any charges being applied to a client’s investment straight from KID (key information documents, a feature of so-called Packaged Retail and Insurance-based Investment Products, or PRIIPs, in the EU) and their fund managers. Then, after inserting whatever “indicative tax” would apply in the client’s country of residence, “net growth can be estimated, either annually or at the end of a cumulative five-year period”.

Different sheets on the spreadsheet, the OpesFidelio officials say, enable advisers to consider various tax efficient structures available worldwide, including Spanish-compliant investment bonds, pensions and platforms.

They say it has also been designed to enable different growth rates and tax rates for income and capital gains to be applied, using user input, with linear projections over five years.

It also, they say, allows the user “to select the percentage of investments held in differing investment assets, such as tracker funds and managed funds, while allowing the adviser to select the average actual fund charges that would apply separately for the investment bond or platform charging structure”.

“By considering the returns from the bond, compared with those that would accrue to an investment held outside such a bond, it assumes that 50% of growth is dividends that are taxed, while 50% is capital growth that is taxed,” OpesFidelio estimates.

According to James Pearcy-Caldwell (pictured above), chief executive of the UK-based, internationally-focused Aisa Group, which has fee-based advisory firms operating in various countries specialising in cross-border financial planning, the Bond v Platform Spreadsheet emerged from a review of 32 cases of advice provided by other advisory firms, “in which bonds in general, and Spanish-compliant bonds [in particular] had been recommended for tax or pension reasons – specifically, on the grounds that they would make tax reporting easier for the client as well as, in more than 50% of the cases, that it would be more tax efficient than the other investment options available”.

“The initial findings were nothing short of shocking, but I want to state that a bond used responsibly, without commission, could have genuine benefits,” Pearcy-Caldwell added.

“All of the cases we looked at within the EU had such high charging structures that they resulted in lower investment returns for the respective clients in the first five years, when compared with a passive tracker investment – split 50% FTSE and 50% S&P500 – placed on a platform and taxed annually.

“Put another way, it would be better in most cases to take the low-cost investment route and declare and pay tax annually, than to take the supposedly tax-efficient investment bond and commission-based route, even after taking a fee out of the initial investment.

“But ultimately it is in the hands of advisers to ensure that best advice is provided to clients, particularly when it comes to smaller portfolios and low-tax environments, and to see that alternatives to bonds are considered, along with fee-based advice rather than provider-facilitated commission.”

OpesFidelio is owned and managed by the Aisa Group. The new OpesFidelio Bond versus Platform Spreadsheet is being made available on request to OpesFidelio members and professional trustees and solicitors.

To read more of Pearcy-Caldwell’s thoughts about about this subject, and the findings of the research that led to the OpesFidelio Bond versus Platform Spreadsheet, click here.

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