Mass Affluent Investors Rethink Wealth Strategies

Core Insights - The UK's mass affluent investors are reassessing their wealth strategies due to changing tax rules, high interest rates, and increased digital confidence [1] Group 1: Trends in Wealth Management - There is a noticeable trend of early gifting among mass affluent clients, who are increasingly transferring assets to family and friends while using trusts or family investment companies to maintain control [2] - Planning around Inheritance Tax (IHT) is becoming more proactive, with a growing focus on using trusts to minimize tax liabilities while retaining control [3] - Interest in traditional tax-advantaged vehicles like Enterprise Investment Schemes (EIS), Business Relief (BR), and AIM-listed shares has increased, although the 2024 Budget has dampened enthusiasm for BR and AIM due to reduced relief [4] Group 2: Changes in Investment Strategies - Some investors are rethinking their pension contributions due to concerns about income tax and the treatment of pension assets upon death, leading to a shift towards alternative investment routes [5] - There is a trend towards earlier adoption of annuities to facilitate gifting from excess income, as annuities are currently exempt from the 2027 rules [5] Group 3: Protection Planning and Generational Differences - A shift in protection planning is evident, with a preference for cost-effective term protection over Whole of Life policies to address IHT liabilities [6] - Generational divides are widening within the mass affluent segment, with younger investors expecting faster access to information and utilizing AI tools or RoboAdvice for self-management, complicating intergenerational planning [6]