One of the most important jobs of a financial adviser is to help their clients appreciate the existence of and then put in place reasonable measures to deal with risk. Financial risk.

An essential part of that process in relation to making investments is, no surprises here, the risk assessment, to clarify the investors “attitude to risk”.

It is generally accepted that investors should be encouraged to consider risk in two ways.

• Your ability or capacity to take risk. This is all about your financial circumstances and goals. If you have more wealth and can invest over longer periods, you may be more able to accept a higher degree of risk.
• Your attitude or willingness to take risk. This is more of a mental approach. Some people may not be able to sleep at night at the thought that their investment can fall in value rather than rise.

Both of these aspects ought to be discussed through the risk assessment .

Almost inevitably, many of these risk assessments result in the investor being categorised as being a  “medium risk” investor .

A typical description of this type of investor might be as follows:

• “The opportunity to achieve attractive returns (for growth or income needs) is very important to you but you also want to invest in a way that does not expose all of your capital to more riskier investments. You have some experience in taking investment risks and accept this is necessary to achieve potential returns much higher than those available from cash deposits. You understand that this could involve your capital being invested for five years or more with medium to medium high exposure to stocks and shares and other more riskier investments.
• You understand that the value of any investments you make will fluctuate and you might get back less (or more) than you invested (at maturity or earlier).”

Typically, investors would be regularly re-assessed to determine if their attitude to risk had changed.

It occurs to me  that this process of risk assessment should be more frequently extended to the owners of SMEs who (implicitly or explicitly are relying on their business as their pension) and potential “Nevertirees” (those who are , through choice, likely to continue working in whatever capacity) to encourage them assess or  re-assess the risk that might be inherent in their plans.

The underlying assumption for these people (that they, through continued working or their business will continue to supply sufficient income to deliver an acceptable/desirable lifestyle) must be accepted as carrying some level of risk. But first they need to appreciate that through their actions they are , in effect, making important investment decisions . It’s just that they won’t feel like they are.

In many cases , such individuals  through a traditional risk assessment in connection with say an investment of available money, may be categorised as  “medium risk”. However, in relation to what they are doing through reliance on their business (in effect a single unquoted, illiquid private equity) or reliance on themselves being able to continue to deliver a required level of income, they would be more appropriately categorised as “High Risk” .

If the adviser, in a non confrontational and professional way can get the client to appreciate this then the anxiety necessary for action to result may be generated.

It is likely though, that the client who is relying on their business doesn’t feel like they are taking a high risk by doing so. That’s probably because when they go into work it doesn’t feel like they are making an investment – they are just doing what they do. Making them appreciate the risk and then re-appraising and if necessary adjusting their financial plans in the light of this will be a fundamentally important achievement for the adviser.

While getting risk onto the agenda for many would be “nevertirees” will be essential, it will in many cases be entirely reasonable to assume that some continued income flow will result from their endeavours. And this can be factored into planning to determine what the likely gap will be between what they want to achieve as a future income and what they will based on their current planning – taking account of the risk that the “best case” (eg the continuation of current income at it’s current level will continue forever) may not be what happens in reality. By embracing, with appropriate caution built in, the likelihood that some income from endeavour or business will continue, the future income goal will appear more reasonable. And planning can proceed from this base. In effect  the individual and their adviser will have realised and accepted they they and/or their business is an asset class and through application of their “true” assessed attitude to risk, it will make some sense to add some diversification to the financial plan. This should also include appropriate life and income protection insurance. After all is not reasonable to include the impact of death or serious illness in our risk assessment?

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The Sunday night Downton fest and the preceding X Factor competition (Judges” houses” ..except they are’nt ..mostly ..shades of Cartman there …mostly) represents a juxtaposition that may, at first sight, seem strange and then on reflection be appreciated as being somewhat aligned – at least in their generation of the viewing public’s dedication and approbation.

One has affected voices, histrionics, desperation and tears and the other is the X Factor.

I appreciate that I am WAY behind the journalistic curve by referencing Downton though. Those far a quicker off the mark than me were all over aspects of this latest “season” by using Matthew Crawley’s lack of a will to (understandably) launch into a strongly reasoned argument for the benefits of having one, a valid will that is.

But it turns out there was one – a will – although not “a will as such” according to Lord Grantham. So with the football fan in me coming to the fore “too soon, you started writing too soon!”…. you know how it goes – well any of you who go to football that is….especially Citizens.

So it turns out that Matthew did leave a written (and presumably ) witnessed document that was sufficient to satisfy the requirements for a valid will. A grander examination of what “Matty boy” said in the will, how it was expressed, signed and witnessed did not take place in the programme. That could have got a bit dull but perhaps at the end the programme announcer could have announced that it qualified for a hour’s structured CPD – subject to there being clearly stated “learning outcomes” expressed at the beginning of the programme. But we digress.

At this point I thought it might be worth reminding you what the requirements for a valid will are in case any of you have been inspired by Downton to put your affairs in order.

So what makes a will a valid will – so to speak? There are four main requirements.

First , a will must be in writing unless it is a privileged will but no special form of words is required. It can be hand-written or typed. It doesn’t have to be on any special form. A privileged will is exempt from complying with the Wills Act and can only be made by a member of the armed forces engaged in actual military service or in conditions similar to active military service. One wonders if this rule could be stretched to incorporate stewards at a Tottenham v Arsenal/Chelsea/West Ham game.

Second , the testator or testatrix must sign the will. The courts will accept as a signature whatever mark was intended to be their signature, and this can include a cross or other mark. Normally the signature is made at the end of the will but if the will is signed elsewhere it can still be valid.

Third, he testator or testatrix must intend to give effective to the will be signing it.

Testamentary intent involves the testator having subjectively intended that the document in question constitute his or her will at the time it was executed. Ordinarily, the opening recital, eg “I, Matthew Crawley, do hereby declare this instrument to be my last will and testament …” will usually suffice. This could, if you wish be written on a piece of paper that can conveniently drop from the book in which you place it when, after your death someone looks through your things. You could also sew it inside your favourite teddy bear or, perhaps, deposit it for safekeeping and make it clear to all where it is. But that would be too easy and not nearly dramatic enough for a TV representation of your post death drama.

And fourth the testator or testatrix’s signature must be witnessed by at least two witnesses. They must both be present at the same time when the testator or testatrix signs the will. The witnesses must acknowledge the signature in the presence of the testator or testatrix though not necessarily in the presence of each other.

Get it? Got it? Good !! Go testate!!

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The use of “superficial sensationalism” in the title does not represent TC supporting aggressive tax avoidance. It’s just a plea for a little more grown up journalism.

Last night’s programme on tax avoidance didn’t really help the debate….and caused me to miss Corrie!
The majority of the programme felt like an advert for a mini..and was the driver exceeding the speed limit?
That aside, a little balance wouldn’t have gone amiss.

Practitioners know that the UK tax system is over engineered. And it is this that has given rise to the loopholes to be exploited in an environment where being within the “letter of the law” was what counted. But it is also known that the game in relation to avoidance and what will and won’t be accepted has actually changed.

That is not to say that all is now perfect. Such an enormous change will take time to bed in..but maybe not that much time.

Underpinning this change is the General Anti Abuse Rule aimed at reinforcing specific anti-avoidance provisions and ensuring that the intention of parliament is enforced and not easily side-stepped.

It’s early days but this legislation represents an attempt at real change to what is and isn’t permissible in relation to avoidance.

There is real evidence that this new legislation plus the continuing “naming and shaming” plus purposive judgements in the courts and tribunals is bringing about a change to the public (individual and corporate) attitude to and appetite for avoidance.

And the GAAR wasn’t even mentioned in the programme.

David Heaton was of course – as was the Chancellor’s “grubby mitts”.

Important for advisers to remember and to reinforce with their clients is that action that is specifically contemplated by and even encouraged by legislation and is not abusive (as defined by the GAAR) will be acceptable and effective.

Future legislation on any currently effective planning cannot be ruled out of course. The possible new “anti fragmentation” rules are a good example of this.But the new zeitgeist doesn’t mean that no planning is possible or that all planning is unacceptable.

And in closing, lets not forget that there is a very delicate line for the Government to draw between “over incentivising” some businesses and individuals with tax breaks in the law that could be perceived as unfair and making the UK an environment that is a good place to do business in a way that benefits (commercially) the business, and the people of the UK.

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As a long time Gooner I have found myself drawn into the (set to be) long running saga of the Luis Suarez transfer.

Aside from the football related aspects it’s the contractual point that interests me.

There appears (at least according to the press) to be some uncertainty over a key clause.  One side, Luis’ side, feels the words of the clause in question compel Liverpool to sell Suarez if an offer of more than £40m is made.  There is a variation on this interpretation that is that the £40m+ offer compel Liverpool not to sell but to allow the player to talk to the team making the offer.

And the last interpretation is that the clause merely compels Liverpool to inform Suarez of the offer but does not compel them to allow him to speak to the club who mad the offer.

If you favour either of the first two interpretations (and especially the first one) then you would make an offer of just enough to trigger the outcome you are seeking wouldn’t you? An offer of say £40 million plus £1. Now who would do that? What could they be smoking?

Leaving aside any discussion of what is or isn’t being smoked, one could say that the Arsenal offer was over generous if “triggering the clause” was the objective… £40m and 1p would have done. But hey, we’re like that .generous to a fault. And if questions are to be raised about being under the influence, some more serious questions could be asked of our friends from the North in relation to the acquisition of Andy Carroll , Jordan Henderson , Stuart Downing …the list goes on. Some have even suggested that the extra £1 in Arsene’s offer was, indeed, for Mister Downing.

But, moving on from the banter…non lawyers will express disbelief that there isn’t clarity over such an important clause in a contract.  Lawyers and those with legal training (like many of us at TC) will however know that a lack of clarity in a legal document is completely believable. Regardless of whether such a lack of clarity actually exists in the Suarez contract.

I have seen many trusts and wills where it is far from clear what the effect or outcome of a clause should be.  The intention may have been clear but the articulation is less than perfect.  After all, “it’s only words” – as the Bee Gees sang.  Not that I am a Bee Gees fan – or a fan of unclear drafting.

And it’s not just private documents that suffer from a lack of clarity.  Legislation also suffers from a divergence in what is stated by the words from what Parliament’s intention was.  That’s why so many avoidance schemes have been so successful.  They have worked to achieve an outcome that wasn’t intended by Parliament but was not prevented by the mere words of the legislation.  And that’s why we have had a steady flow of litigation involving HMRC attempting to secure a “purposive” (ie less than strictly formally legal) interpretation of legislation and, of course, the General Anti Abuse Rule that will operate, broadly speaking, to apply the intention of Parliament in cases where there has been abuse (as defined within the GAAR).

The lesson coming from the Suarez case (that may itself, it seems, go to some form of arbitration) is one that anyone involved in composing the terms of a private trust or will, would do well to observe.  Ensure that what you mean to achieve is expressed clearly by the words of the legal document you are to use.  Clear in a way that is beyond confusion.  Setting out, in some way, a plain English intention before using the necessary legal words in the document, a kind of “recital” or “narrative” may also be helpful – if only to concentrate the mind on the job at hand.

It will save a lot of trouble down the track.

If only the legal team advising Pep’s brother had worked to these principles – we may have had Luis in the team for our first shot at a trophy this weekend. OK, it’s the Emirates Cup … but beggars can’t be choosers!

What have Starbucks and Prince Charles got in common? No, not frapuccinos or grandchildren – though, no doubt, some grandparents and grandchildren do visit Starbucks.

There are two things in common that I know of.

The first is that the tax that they pay (or, more accurately the lack of it) has been a subject of interest and debate for “Witchfinder General” Margaret Hodge of the Public Accounts committee. The second is that both pay tax voluntarily. Starbucks, following the “inquest” into their low (but apparently not illegal) effective rate of corporation tax. Prince Charles on account of the arcane tax position of the “private estate” that is the Duchy of Cornwall. Basically, the Duchy has no legal liability to pay tax (income tax , capital gains tax or corporation tax) as it is equated to the (tax exempt) Prince himself.

The Prince, however, voluntarily pays tax on income from the Duchy that is paid to him net of any deductions for allowable expenses eg private staff costs. So on the one hand , “well done Starbucks and Prince Charles”. On the other, shouldn’t the law be amended to ensure that the amount of tax thought to be reasonable , is actually paid ?

In the case of Starbucks , of course, a high degree of international co-operation would be necessary to achieve this objective and when national self interest is at play the outcome is likely to be anything but certain and quickly achieved. Subject to this very real practical challenge though , relying on voluntary payments seems all a bit too “discretionary” in this day and age doesn’t it?

Anyway, make mine a Grande(daddy) Taxachino.

OK, that’s pretty weak I agree. Add two extra shots.