1) Meeting objectives – Review the suitability of the assets Andrea has received from Carl as part of the divorce settlement

Question 1

Explain to Andrea why she should consider moving all her assets onto a platform. (13 points)

Answer 1

• Most of the administration of transferring is usually completed by the platform provider.
• Reduces ongoing time, effort and paperwork/easier for Andrea to manage as she gets older/easy access online at all times – total wealth can be viewed in one place.
• Consolidated tax statements are automatic.
• Should have option to add pensions (if FAD chosen) when retired so all wealth can be managed in one place.
• Wide range of providers/asset classes/funds/investments/tax wrappers.
• Performance is easy to obtain.
• Online switching/easy to gradually bed and ISA OEICs and shares.
• Can promote good relationship with the adviser.
• Unbundled charging, transparent/large portfolio such as Andrea’s can attract volume discounts.
• Funds can usually be bought without an initial charge.
• Calculation tools.
• Reports and valuations can be stored online.
• Can apply asset allocation strategies across different tax wrappers/possibility of automatic rebalancing.

Question 2

State the benefits and drawbacks for Andrea if she chooses to retain the pharmaceutical shares to top up her retirement income. (11 points)

Answer 2

Benefits:
* Potential for growth/inflation proofing.
* Can use her CGT exempt amount in the future.
* No currency risk.
* Will provide dividend income/can use her DA.
* Diversification/equity holding.
* Flexible withdrawals/can encash as required.

Drawbacks:
* Does not meet Andreas’s cautious ATR/high risk/risk of capital loss.
* Lack of geographical, asset and sector diversification.
* Difficult to administer/monitor/may need advice.
* Lack of liquidity/may be illiquid.
* Dividend income taxable over DA at 33.75%/not held in ISA/may be liable to CGT.

Question 3

Identify the key reasons why Andrea should consider maintaining the OEICs for the longer term. (11 points)

Answer 3

• Funds can be changed to match ATR/timescales.
• Fixed interest, UK and global equities offer diversification.
• Tracker funds are low cost.
• Wide choice of funds available/passives/active/Discretionary Fund Management/multi-asset.
• No CGT on internal fund changes within OEIC.
• Uses DA.
• Simple tax reporting/can calculate gains/use CGT exempt amount.
• Can be held on platform/easier to sell/fund switch/rebalancing/easier to reinvest dividends.
• Collectives can be used to facilitate bed & ISA.
• Good potential for growth.
• Can generate an income stream.