Advisor “We can help you save tax”
Footballer ” Thanks, that’s great, but are you sure I’m not doing anything wrong or illegal”
Advisor “No, but just remember, the worst that can happen you just end up paying the tax anyway, so what have you got to lose?”
Footballer ” Well, if you think its worth a shot, let’s do it”
We all want to save tax. It’s natural for all of us to look for ways to minimise or mitigate the tax we pay. We don’t want it to be illegal, but legitimate planning is fine. However, sometimes perspective can be lost when the focus is on tax saving. What if the conversation was as follows…
Advisor “We can help you save tax”
Footballer” Thanks, that’s great, but am I doing anything wrong or illegal”
Advisor: “If the planning works you save tax, but it’s risky and if it goes wrong, you’ll probably have the press crawling all over you because you are trying to avoid tax when everyone else has to pay. You’ll also feel emotionally drained by the hassle. You’ll lose the costs of setting up the scheme and you’ll carry the costs of sorting out the mess.”
How do you think the footballer would react with that statement? What would you say? Do you still take a chance?
Former Liverpool, Tottenham Hotspur and Charlton Athletic player Danny Murphy appeared on TalkSport to highlight concerns about how his generation of players were treated by some advisers. ‘You have to remember that we as Premier League players, we were at Premier League clubs, we were not protected by the PFA, not protected by the Premier League when the IFAs were coming into the football clubs and brainwashing us or manipulating us. Young lads with no idea of money or concept of what to do. So now we have got these problems that they can’t deal with,’ he said. It appears that advisers were happy to sell tax planning schemes. It was in the advisers’ interests to do so. As we are now finding out, it was not in the best interests of the footballers.
If your motives are to save tax, there will be always someone who will attempt to offer a solution for you. They sell what you want to buy.
It has so much to do with the framing of questions…all of which comes from conflicts of interest. If advisors are aware of a tax scheme and the ‘selling’ or ‘recommending’ of that tax scheme makes money for them, then the advice has the potential to be biased. If someone dangles the carrot of tax saving to you, it can be easy to grasp as it pushes all the right emotional buttons. In an ideal world, you pay for advice that does not benefit from the tax planning scheme. But would you pay £000’s for advice to tell you to do nothing? It can be hard to swallow.
Wayne Rooney is taking action. Read more here. Andy Cole is taking action. Read more here. They are unhappy with the advice they received. The headline ‘500 footballers suffer poor wealth advice’ comes from the Guardian, so it’s not just Wayne Rooney and Andy Cole. It’s very clear that finding the right advice is hard.
Modern day footballers have been lucky. They were born with talent and worked hard to develop their talent; they were lucky to be spotted by football scouts and lucky to have remained fit. In so many ways they have been fortunate. However, it now appears that some have been unlucky with financial advice. It’s not just footballers. It’s everyone. Financial advice has tended to involve the selling of products and schemes. It has been the way financial advice has been delivered for many years. It is almost impossible to know how to carry out due diligence on any adviser before you act on their advice. It only needs an adviser whose integrity is not as strong as you would hope.
To find good advice that is in your interests involves some luck. You would think the best advisers with the highest levels of integrity would work for the most revered firms like those used by Rooney et al. Alas, the system doesn’t work like that. Which is why luck is part of the solution. To get lucky, you need to spend time becoming your own financial adviser rather than blindly delegating to others. Fortunately, we can help you think about what you can do for yourself and how you can properly manage those you delegate to.
We should also remember that if the footballer is greedy to save tax, the advisor can be greedy to provide a solution. Sometimes when you seek, you will find. And some people end up deserving each other.