Don’t Be Afraid to Dream is a book I published in 1996.  I was aged 49 and, as you can see, I still had a small amount of hair on the top of my head and no hearing aids in my ears.  The business that I started with a small bank loan was doing fine – we had just celebrated 25 years in business.  I think that was one of the main reasons I decided to write the book.

It’s now March 2018 and the business is 47 years old.  Thankfully I am still working and doing what I love to do.  I am not the boss anymore as the business is under the direction of my son, Eamon.  With him at the helm the business is growing in a wonderful new direction.  It was Francis Bacon who wrote about the powerful benefit of the combination of the enthusiasm of youth and the experience of age, “Young men are better in doing; old men in calculating risks.”

Thankfully, Eamon and I work well together.  His young daughter Claire said to me recently when she came to visit us in the office “Ted you are really lucky to be working here!”  I asked her why this was and the reply she gave was lovely – “because you get to see my Dad every day when you come to work.”

Around the time I wrote the book 25 years ago, I was on a bit of a crusade about the way our industry operated and the exceedingly high initial costs and the hidden charges that were being taken from pensions and savings policies.  These were causing much disquiet to the public at large.  In chapter 8, page 75 of my book I included a letter I wrote which was printed in November 1995 in The Irish Broker magazine.

The same year I spoke on exactly the same theme to the LIA in the UK at their annual meeting in Birmingham and also at that year’s annual meeting of the Million Dollar Round Table (MDRT) in Nashville.  MDRT, at that time, had a worldwide membership of over 20,000 people and was a wonderful network of financial advisors interested in learning from other financial advisors who were also attending the annual meeting.  As a result of attending, I was able to learn first-hand about the better value products that were available elsewhere.

After that meeting I visited the CEO of every life company in Dublin and told them in simple terms what I was looking for.  I wanted pension and saving policies without any major upfront charges.  I wanted advisors and product providers to share in the annual management charge, simple as that.

At the time, the reaction to my request was quite muted!  You know the usual story about systems and stuff!

I have a determined streak and so I kept going back.  Eventually John Murphy, the CEO at Friends First, agreed to do a savings plan for me the way I wanted it structured.  Soon afterwards we put in place the first savings policy without any commission or policy fees or any other hidden charges in Ireland.  The first ‘fund-based’ contract was set-up and over the years we could see how important these new contracts were to our customers, as well as to accountants and tax advisors who really understood what we were trying to do.

Then Eamon came on board and business was going great until we hit the Irish Economic Crash of 2007.  Suddenly, the fund-based income that we had built up over the previous 20 years or so was all the income we had coming in to City Life each month.  This was due to the lack of confidence the country now had.  Basically, nobody wanted to set-up new pensions or investments for 3 or 4 years.  People were too shell shocked to even pay once off advice fees.  That recurring income saved our business and meant we could keep all of our wonderful staff employed.

At that time, I saw first-hand what Francis Bacon had written about.  The youthful enthusiasm and an experienced head was now badly needed and it definitely was a case of a serious problem creating a serious opportunity.

We had been in discussion with our MDRT colleagues in the UK and with our good friend, Barry Woolley, about the progress they were making in the UK with regards to developing funds platforms, availing of the superb technologies now available to advisors.  Such platforms would enable all of an individual’s pension funds or lump sum investments to be held in one place for ease of administration.

Such simplification and consolidation via a platform is also of major importance in relation to individual lump sum investments that are subject to exit tax on the profit.  On a platform system the tax due on a profitable investment can be offset against a loss making one within the one platform umbrella – this is very important.

We now knew what we were looking for and about 3 years ago we started using one particular funds platform for our clients, a platform that we had a hand in designing due to the interest this platform developer had in how we might use it.  For the first time ever, we were able to put the City Life Asset Allocation Model and all of an individual’s investments or pensions on to one tax efficient and cost-effective platform.  As a result, we had the mixture of assets (suiting our client’s attitude to risk) with the best fund managers (based on performance) and price all in the one place.  It was and continues to be so exciting.  Since then, we have also started using a second platform for more niche requirements – another equally promising solution.

Platforms in Operation – Most Suitable for Larger Investors

We have spent nearly 3 years transferring much of our clients’ various investments, pensions and Approved Retirement Funds (ARF) onto our main platform and, in nearly every case, this was done at no cost to our clients.

For example, let’s say one of our clients has €1,000,000 in their ARF.  This was most likely spread between 3 or 4 life companies in the “bad old days”.  That meant 3 or 4 strands of separate income each year and all of these had to be monitored and accounted for in their tax returns.  After amalgamating their ARFs onto the Platform (but still invested across, say, 10-15 funds – managed by an equally large number of fund managers), this was simplified to just one contract.  This is important in death claims as the transferring to the widow, for example, is now only one transaction.

Over the last number of years, as a result of the Platform, we have found that we are getting inquiries for much larger investments than before.  The maximum ARF allowed in Ireland is now less than €2million when the tax free and tax paid cash is withdrawn – but there is no such limit of course for lump sum investments.  Investments (non-pension), in my view, should always be done on a single platform for tax reasons.  For these tax reasons, investments via our platform solution are proving to be the strongest growth area now for City Life.

For example, if someone has €5 million to invest and they decide to avoid the single platform solution but take the “bad old” approach – put €2.5 million with Life Company A and €2.5 million with Life Company B and invest for a five-year period.  Let’s assume the Life Company A investment is 100 % in equites and the Life Company B investment is held in lower risk funds like Absolute Return funds and Government and Corporate Bonds.  At the end of the 5 years both investments are withdrawn in full: one is worth €2 million and the other is worth €3 million.  On the surface it might be assumed that overall no profit has been made so no tax is due – wrong!  Exit tax will be paid at 41% on the profit of €500,000 on the investment which is now worth €3 million.  No offset on the loss of €500,000 is allowed as the investments are with two separate life companies.  So, tax payable is a whopping 41% of €500,000 which comes to €205,000.

However, if the entire investment had been made with City Life on our platform the funds that fell in value would have offset the growth made on the other and zero tax would have been payable.  Tax would only be paid at the end on any overall profit made.

In Summary

Quite simply, the rules of the game really haven’t changed much over the past decade when it comes to pension saving or investing.  However, the approach, facilitated by advanced technology, has.  Our business, as an independently owned advisory firm, continues to move with these technologies, to bring tax efficient investment solutions from the middle to high end of the market.

My personal focus this year is on investors with €5M+ plus in assets – as I feel we can add real value in that space.  It is a challenge but thankfully, the good work we are doing for existing clients continues to generate positive word of mouth in what is a relatively buoyant economy.

A challenge, but I always love one of those I must say!

Ted Dwyer

March 2018