After changes were made in last year’s Autumn Budget to inheritance tax (IHT), UK wealth manager Rathbones has just released new research looking at the impact of the increasing complexity surrounding family inheritance on bespoke investment services.  

Research by Rathbones reveals that almost all (97 per cent) of independent financial advisors surveyed expect demand to rise for bespoke portfolios managed by third-party wealth managers, due to the increasing complexity of inheritance tax (IHT) for families.  

The research found that advisors are finding managing growth and tax efficiency in larger client portfolios more demanding following changes to tax relief on pensions and estates. 

Rathbones, which manages £109.2 billion ($145 billion) of assets, commissioned independent research agency PureProfile to interview 100 UK IFAs and financial planners including 75 who currently offer bespoke investment management/discretionary fund management services. Rathbones’ bespoke investment management is typically designed for clients that have £300,000 or more to invest.

The study shows that 65 per cent of respondents believe that portfolio management has become more difficult. A contributing factor identified by the study is the growing complexity in decumulation strategies and estate planning following changes introduced in last year’s Autumn Budget. Around 93 per cent of advisors questioned said that it is creating ncreased interest in bespoke investment services.

In the UK's Autumn Budget UK Chancellor of the Exchequer Rachel Reeves announced that inheritance tax thresholds – charged at 40 per cent above a threshold of £325,000 – would stay frozen until 2030, and inherited pensions would be brought into inheritance tax from 2027. Agricultural Relief and Business Property Relief have also been reformed in the budget, meaning that from April 2026, the first £1 million of qualifying combined assets will have no inheritance tax at all, but for assets over £1 million a 50 per cent relief will apply, at an effective rate of 20 per cent. Qualifying shares on the Alternative Investment Market (AIM) will no longer have full exemption from IHT, instead from 2026 they will have an inheritance tax rate of 20 per cent if they are held for two years.

“Changes in last year’s budget to inheritance tax (IHT) are having a major impact on advisors and their clients with large investment portfolios, with advisors finding managing both growth and tax efficiency more challenging as a result,” Simon Taylor, head of strategic partnerships and platforms at Rathbones, said. “Furthermore, the Financial Conduct Authority’s (FCA) thematic review on retirement income advice, published in March 2024, is adding increased impetus for advisor businesses to think carefully about investment propositions for their clients, resulting in increased interest in bespoke services.”

Most advisors who offer bespoke investment services are more likely to do so for decumulation – around 59 per cent questioned do so, while 41 per cent are more likely to offer them during the accumulation phase. In terms of timing, the study found that 39 per cent are more likely to offer bespoke services to those clients approaching retirement while 15 per cent do so for recently-retired clients and 5 per cent for those who have been retired for some time.