Chartered

PROTECTING CORPORATE CHARTERED STATUS

Melissa Collett explains how the integrit y of Corporate Chartered status is enhanced by a robust and independent complaints process

o achieve Corporate Chartered status (CCS) requires a public commitment to professional standards. With that public commitment comes benefi ts: using the Chartered logo as a symbol of alignment with the Chartered ethos of nurturing knowledge, clientcentricity and serving society.

Chartered status also comes with responsibilities that are outlined in the CCS eligibility criteria, rules and terms and

conditions (documentation available at cii.co.uk). Such responsibilities include cooperation with the Chartered Insurance Institute (CII) and the requirement to notify us of any issues arising while the fi rm holds CCS. Two of the most signifi cant responsibilities relate to conduct and misuse of intellectual property. Th ese are: ● Promptly notify the CII of any investigation commenced by any other professional, statutory or regulatory body or authority into its conduct or affairs, or that of its staff (whether or not they are individual members of the CII), taking all reasonable steps to obtain any required permission for such notifi cation to the CII. (Rule 5(d)) ● Th e CCS entity must only use the trademarks strictly in accordance with and for the purposes authorised in these CCS rules. (Rule 11(c)). Th e CII appreciates that Chartered fi rms can face challenges such as regulatory intervention or press coverage that may affect the reputation of its business. If this does occur to a Chartered fi rm, it should notify the CII as soon as possible by emailing charteredfi rm@ cii.co.uk (failure to do so in such circumstances could represent a breach of the CCS rules). Th e CII can then liaise with the Chartered fi rm to establish whether this incident could affect its Chartered status.

If a Chartered fi rm is unsure if it is using the Chartered logo correctly, it should contact the CII, which can provide guidance and support.

COMPLAINTS PROCESS If the CII becomes aware of any issues concerning a Chartered fi rm or a fi rm incorrectly holding itself out as Chartered, either as a result of an external complaint or through the professional body’s own monitoring, the CII’s complaints against CCS fi rms process will be triggered.

Chartered status also comes with responsibilities that are outlined in the CCS eligibility criteria, rules and terms and conditions

Th e CII has reviewed this process with the input of its Professional Standards Committee and this is detailed below: ● A complaint against a Chartered fi rm can arise when either an individual or a fi rm (whether they are Chartered themselves or not) is making a complaint about a Chartered fi rm. To qualify as a complaint, there must objectively be clear evidence of a potential breach of the CCS rules. Th is could include where the complainant believes that a Chartered fi rm is under investigation by the Financial Conduct Authority; where investigative action has been taken against members of its staff; or where there is a potential misuse of the CCS trademarks. ● In the fi rst instance, any complaints received will be reviewed by the CII’s Professional Standards team. Th e vast majority of complaints can be dealt with at this initial stage by the Professional Standards team contacting the Chartered fi rm, explaining the issue, listening to the fi rm and agreeing how to rectify the issue. ● If the complaint cannot be resolved, it will be escalated to the Professional Standards director for a decision. If the resolution could involve removal of a Chartered fi rm’s CCS or is sensitive in nature, the Professional Standards director may consult with the chair of the Professional Standards Committee before reaching a fi nal decision.

At all stages of the process, the Chartered fi rm that is the subject of the complaint will be given a fair opportunity to respond to the complaint made against it. Th e Chartered fi rm will be expected to promptly provide such information as the CII reasonably requests.

If the Chartered fi rm does not accept the decision of the Professional Standards director, the CCS rules provide for a right of review. Th is review is conducted by a supervisory panel comprising three members drawn from the CII’s Independent Review Pool. Th e panel would review the decision of the Professional Standards director alongside written representations from both the CII and the CCS fi rm before reaching its decision.

Th e CII strongly believes that Chartered fi rms intend to do the right thing and recognises that diffi culties can arise at any time. Th e CII’s desire is to work with Chartered fi rms to address any issues that may arise, where possible. Th rough a collaborative and transparent relationship between the CII and its Chartered fi rms, we believe that the standing of CCS can be enhanced and lead to greater trust in it by the public.

To raise concerns about a CCS fi rm, email: ComplaintsAgainstCCSfi rms@ cii.co.uk ●

Melissa Collett is professional standards director of the CII

GETTING TECHNICAL

Technical Connection answer queries on DGTs and benefit crystallisation events

QI have a client who has a discretionary discounted gift trust (DGT), who wants to move the fund management to another provider. If the bond was surrendered and the proceeds re-invested, how would the trust be taxed?

AIf the bond was surrendered, any chargeable event gain would be assessed to income tax on the settlor, if alive and UK resident, and otherwise on the trustees at the trust rate (45% with a credit for basic rate tax if the bond is an onshore bond). If the settlor is assessable to tax, they have a statutory right to recover the tax paid from the trustees, who would need to fund the repayment out of the surrender proceeds. If the settlor does not exercise this statutory right of recovery (and it is not excluded by the trust deed), they would be treated as adding to the trust and this would affect the inheritance tax position.

Another issue would be that because the new investment amount would be different from the original investment amount, the regular withdrawal amount that is payable to the settlor from the DGT may not equate to an exact percentage of the new investment amount, so it may not therefore be possible to fi x withdrawals from the new plan at the required level. Th is would cause a problem as it is not possible to increase or reduce the ‘income’ level under a DGT.

A possible solution would be to reinvest only so much into the bond as was invested into the original plan. However, the trustees would then need to decide what to do with any surplus investment growth. It may be possible to distribute this to benefi ciaries and it would be necessary to consult the terms of the trust to check that there is no prohibition on such distributions during the settlor’s lifetime.

It is also essential to check the terms of the DGT as the trust deed could prevent the investments from being moved (some DGTs intrinsically link the trust terms to the original investment product). Q When will a benefi t crystallisation event (BCE) occur on the death of a pension scheme member and, if a lifetime allowance (LTA) charge applies, who pays it?

AA BCE occurs where the member dies before the age of 75 and uncrystallised funds are designated within two years to provide a benefi ciary’s drawdown or used to provide a benefi ciary’s annuity. Th erefore, while any payments to the benefi ciary are free of income tax in these circumstances, an LTA charge can still apply. A scheme pension paid to a benefi ciary will not be a BCE. However, the payments will be subject to income tax.

A BCE will also occur on any lump sum death benefi t payment. In all cases, the scheme administrator will pay the death benefi ts without deducting an LTA charge.

Th e personal representatives are responsible for determining whether an LTA charge applies. Th ey do this after the payment of the lump sum, the date of designation to drawdown, or the date the benefi ciary becomes entitled to an annuity as appropriate.

Where the personal representatives identify an LTA charge, they must report this to HM Revenue & Customs (HMRC). HMRC will then assess the benefi ciary on any charge due. Th e usual LTA charges will apply – 55% on any excess paid as a lump sum, or 25% on any excess used to provide income. ●

→ These are actual questions and answers taken from the Technical Connection Techlink Professional question bank. Chartered fi nancial planners can fi nd out more about a trial subscription to TechWise by visiting: www.techlink.co.uk/techwise

SUSTAINABLE INVESTMENT How do you make sense of the variet y of different approaches?

The number of investment propositions dubbed ‘ethical’, ‘ESG’ and ‘responsible’ – to use but a few terms – is growing. Given the different approaches employed, it can be diffi cult to compare funds that are deemed sustainable. At Hawksmoor Investment Management we have developed a framework for evaluating different types of sustainable funds – Impact, Integration, Exclusion. Th is framework helps our Investment Managers, fi nancial advisers and their clients to think about and position different funds. ● Impactfunds actively seek to invest in companies making a positive impact on the environment and/or society. Examples of themes include improving the effi ciency of using natural resources and providing fi nancial services to under-served populations. ● Integration funds go above and beyond traditional negative screening in order to incorporate positive screening. Examples of positive characteristics include companies with strong community relations and those providing healthcare for employees in developing countries. ● Exclusion funds adopt a traditional negative screening approach in order to avoid investment in companies undertaking contentious activities. Examples include the production of fossil fuels and any involvement with animal testing.

We invest in funds which sit in each of these categories, catering for portfolios across the spectrum from ‘light green’ to positive impact mandates. Performance is strong* – it is no longer the case that investing sustainably is detrimental to performance. Hawksmoor’s Moderate (40-60% Equity) Sustainable World model portfolio, for instance, rose by 16.4% over the course of 2019, eclipsing the 11.3% returned by its ARC Sterling Balanced Asset PCI comparator (Source: FE Analytics).

Our proprietary fund research process is at the heart of our work in the fi eld of sustainable investment. Hawksmoor’s in-house Research team has a rigorous and disciplined approach to selecting sustainable investments. We attend regular meetings, hold conference calls and attend investment conferences with the managers of sustainable funds. Whilst it can be diffi cult to ‘draw a line in the sand’, our fund research process is very important and helps to ensure that we avoid ‘greenwashing’.

Hawksmoor offers a Sustainable World Discretionary Portfolio Management Service (DPMS) and a Sustainable World Model Portfolio Service (MPS). Th e former employs exactly the same asset allocation framework, portfolio construction and fund research processes as for our ‘traditional’ portfolios. Th e latter was launched in July 2018 and now encompasses four different risk levels (see below). Our Sustainable World portfolios allow clients the opportunity to combine their investment objectives with supporting the aims of the United Nations Sustainable Development Goals. We believe that investing sustainably should not involve clients taking on more risk than in our traditional portfolios, nor should it require a higher minimum investment amount, or come at a premium cost – Hawksmoor’s annual management charge is the same for sustainable and traditional portfolios. We treat all investors, and their advisers, equally.

Hawksmoor’s Sustainable World Model Portfolio Service (MPS) comprises four portfolios: ● Cautious (0-40% Equity) Sustainable World ● Moderate (40-60% Equity) Sustainable World ● Adventurous (60-80% Equity) Sustainable World ● Equity Risk (80-100% Equity) Sustainable World.

Th ese sit within our overall range of twelve model portfolios, each of which has an annual management charge of just 0.25% + VAT with no minimum investment amount imposed by Hawksmoor. Our MPS is currently available on eight different platforms: Aegon (ARC), Ascentric, Aviva, Novia, Nucleus, Seven Investment Management, Standard Life (Wrap) and Transact. ●

James Clark is a Senior Fund Analyst at Hawksmoor Investment Management

*Past performance is not a guide to future performance

For more information about Hawksmoor’s Sustainable World investment services, visit hawksmoorim.co.uk or contact Jill Gill on 01392 454708