CGT support for advisers on platforms is influencing provider selection

91% of advisers are concerned about CGT

Research published by Financial Software Ltd (FSL), shows that capital gains tax (CGT) functionality and support given to advisers via platforms is influencing their platform selection and due diligence.

As speculation around changes to the CGT regime ramps up ahead of the budget, the majority (76%) of the 130 advisers polled have said that the support offered to them is impacting which providers they’re choosing to work with. The research by the lang cat, commissioned by FSL, also shows that more than 91% reported that CGT is of greater concern for them and their clients compared to two years ago.

This comes as more people are being pulled into CGT scope with the latest statistics from HMRC showing that since 2019/20, numbers paying the tax have risen from 272,000 to 369,000, representing a 36% increase. The Institute for Fiscal Studies (IFS), among others, has called for major reform of the tax to make it ‘more fair and growth friendly’.

66% of advisers say a CGT calculator is essential

To support their work with clients, two thirds (66%) of respondents said a CGT calculator is essential and a further 19% said it was “important”. While CGT functionality that includes assets’ book cost (where assets’ original cost is listed) is also considered essential by 63% and important for almost a third (30%).

Further data and analysis from the lang cat’s Analyser software backs this up. Over the past year, two thirds of advice firms (62%) selected CGT tools when conducting their due diligence and looking for platforms to partner with. The analysis shows that having a CGT calculator was the top-ranking extra feature out of a total of 600 options, sitting below the vital hygiene factors of having a GIA, ISA, Flexi-Access drawdown, and access to whole of market.

Mounting pressure ahead of Autumn Budget

Commenting on the findings, Michael Edwards, MD at FSL, said: “We know that CGT is a growing issue for more investors and so advisers want to provide the very best support to their clients. This means providing them with accurate and timely insights to ensure they maximise all the tax allowances and exemptions available. As we head towards the budget, speculation around what might happen to CGT is creating more uncertainty, and so advisers are likely to be under even more pressure to reassure clients that their assets will be protected.”

Gareth Hope, Head of Research at Wren Sterling added: “With the expectations of increases to Capital Gains Tax rates ahead in the October Budget, and the near extinction of annual exempt amounts under the previous Government, then the challenges of CGT planning are only set to continue. Part of our job is to help clients steer through these challenges, and that is almost impossible without good reporting and tooling to show the options beforehand, and aid reporting afterwards.

“CGT planning and reporting tools should now be a hygiene factor for platforms, and anyone that hasn’t paid their tool (if they have one) the love it deserves in recent years, may start to find that advisory businesses actively choose against it for both new clients, but also clients already on the platform. The lack of data that is ported with provider switches only serves to disadvantage clients and their planning and I’d support any cause that sought to make that a mandatory part of the provider switch process.”

This article was written in collaboration with the lang cat.