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The Senior Executive
The analysis

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Tony attends an initial meeting with one of Bloomsbury's Certified Financial Planners. At this meeting the planner explores his goals and values, particularly towards money.

Tony and his wife then each complete a psychometric risk-profiling questionnaire, which Bloomsbury analyses to understand their combined attitude to risk. This allows the planner to understand the maximum risk with which Tony and his wife can be comfortable and thus the likely return they might reasonably expect consistent with that.

Bloomsbury collates Tony's personal data to calculate the actual return that he needs to achieve on his long-term capital, given a number of agreed assumptions. The required return is rather higher than the expected return that his acceptable risk profile will allow, so it appears that he will need to make some adjustment to his goals, his current expenditure or both.

Bloomsbury makes further observations about Tony's situation as follows:

• Tony is heavily dependent on the fortunes of his employer for his future financial security, over which he has only limited control. In addition to his earnings, his main pension benefits depend on the good health of the pension scheme and a substantial part of his investment assets is in either shares or share options in the same company.
• His existing assets are allocated nearly 80% to equities, which is significantly higher than the proportion with which his responses to the risk profiling exercise suggested he would be comfortable.
• The existing portfolio, which is held entirely in his own name, has both unrealised gains and unrealised losses, which could be used to extract capital tax-efficiently.
• Given that it appears unlikely that he would currently be able to achieve his goals and he is not inclined to increase the risk profile of his portfolio further, after discussion, Tony decides to scale down his current expenditure and increase his savings by around £30,000 p.a. and to plan on post-retirement earnings of £30,000 p.a.
• His company shares could be gradually liquidated in favour of a more diversified strategy which would not peg his fortunes so closely to those of his employer.
• Tony's pension benefits exceed the new lifetime allowances which came into force in April 2006. If he applies for primary protection, he can continue to acquire additional benefits and will benefit from an uplifted allowance of 120% more than the standard allowance.
• He could use derivatives to cover the risk of the value of shares falling while he still holds them.
• The tax liabilities on exercise of future share options could be mitigated by the use of film partnership schemes or by EIS investments.
• Tony's wife is a non-earner and receives half the interest from their deposits because they own the accounts equally. Although she pays income tax at only 10%, the interest is being tax deducted at 20% and she has not reclaimed the overpayment, on account of not getting a tax return and not realising that she was overpaying.
• The total annual expenses on his portfolio, which comprises mainly collective funds with some individual shares, amount to some 2.1% p.a. This is acting to consume the additional returns that he might reasonably expect to receive from investing in equities, as opposed to in lower risk assets. In real terms, the net return generated by his portfolio has actually been poorer than that of the UK stockmarket as a whole over the period that he has held it. This has not been helped by the fact that he has been trying to time the market movements, generally unsuccessfully.
• Tony's investment portfolio, including any assets to be held in any future trusts, could be amalgamated into one nominee service to simplify administration and reporting and reduce costs.
• The risk profile of the portfolio could be adjusted - to one which matched Tony's needs more closely - by reducing the equity content in favour of more low yielding fixed interest and by increasing diversification to non-UK markets.
• The IHT liability is currently in excess of £0.8m if Tony were to die before his wife, but since he cannot afford to make gifts, his options are limited at this time.