How will my family know what assets I have?

This is a question we come across in relation to both individual client portfolios and with trust accounts where the holdings are in certificated form. More often than not the holdings that make up the certificated portfolio are stored within a safe in their solicitor’s office. On occasion, however, we have also come across situations where the holdings are quite literally underneath the client’s bed!

At Tilney we have a long history of working with the legal profession. Some of the most common concerns we have heard from those entrusted to look after their clients’ certificated holdings are around the time it takes to deal with the necessary administration, the difficulty in providing an instant up-to-date valuation and the time taken to realise funds from the portfolio. Of course there is also the very tangible concern that something may happen to the physical certificates themselves.

We have assisted a number of firms to help reduce this burden. A member of the investment team will first gather the certificated holdings along with any other associated paperwork, including uncashed dividend cheques, from the solicitor and/or their office and client. We will then sort through each individual item to determine which are still valid.

Once this process is complete, CREST and Stock Transfer Forms are pre-populated for each individual stock, unit trust and fund. These forms will be delivered to the solicitor in order to obtain signatures from the client or trustees.

When the signatures are obtained and forms submitted, individual stocks are generally transferred to our nominee company within a few days. Funds and unit trusts may take slightly longer. The holdings are consolidated into a single investment portfolio which is then in custody of our nominee company. The underlying client/trust remains the beneficial owner.

As soon as the holdings are within our nominee company, the investment manager will review the portfolio to determine its value, risk profile and position in terms of capital gains. In discussion with the solicitor and their client/the trustees, it will be determined whether an advisory or discretionary investment management service is more appropriate.

Where the portfolio is heavily restricted in terms of capital gains, an advisory service may be more appropriate. We would then simply manage the portfolio to make use of the Capital Gains Tax (CGT) allowance each year. In the case of an individual client account, rather than a trust, we can also utilise annual ISA allowances. Where discretionary management is more appropriate the portfolio will be managed in line with the agreed risk/reward profile.

Rather than the solicitor receiving all of the correspondence from the individual companies whose stocks are held, once the investments are within our nominee company we will look after all annual accounts, shareholder communications, corporate actions, dividends and other associated notices. We will collect dividends and pay out or reinvest as desired. Six-monthly valuations of the portfolio and a consolidated annual tax pack will also be prepared and sent to assist with any tax returns.

In addition to reducing the administrative burden, it is useful for the underlying client or trustees and their solicitor to be able to see actual valuations for the total holdings, and it can be a source of reassurance to know they are being managed properly. Up-to-date valuations can be provided on request and the portfolio can be viewed online by the client/trustees at any time.

Where the client/trustees are looking to raise cash from the portfolio, funds are generally accessible in two to three days when the holdings are in nominee accounts. This is in contrast to the requirements for certificated holdings where CREST forms need to be signed by the client, or by various trustees, with a 10-day settlement period.

Case study – the dangers of ‘unvalued’ certificated holdings

To illustrate the point, we can look at the slightly frightening story of one of our long-standing clients. This case study is based on their actual situation, although some details have been changed for anonymity.

In the last few years a relative of the client passed away. He had spent his life living frugally and, although there were share certificates, his estate was valued by the client's solicitor without taking an up-to-date account of the assets before confirmation was granted.

Our client became concerned about the shareholdings, and we were happy to assist. We worked with the client themselves, and their solicitor at a small legal firm. It was a surprise to find that when sorting out the volumes of share certificates they amounted to nearly £800,000. This has been a particularly difficult situation because confirmation had already been granted, and it is still ongoing two years later – but it could have easily been avoided.

The online web resource is a key aspect of our partnership with the Law Society of Scotland. This has been designed to provide relevant information to support solicitors when discussing their clients’ finances. Download factsheets ranging from Key Facts about Pension Reform and Pension Reform on Divorce to the latest Market and Economic Commentary.