Octopus suspends withdrawals from its IHT scheme, Fern Trading

The suspension itself is not necessarily the red flag; pretending an unquoted investment offers bank-account-style liquidity would be. If a major transaction could materially change Fern’s value, pausing transactions rather than allowing investors to buy or sell at a potentially inaccurate price is sensible. But it is also a very real reminder of what investors are buying. Business Relief investments can be extremely useful for estate planning, but they are not cash accounts and liquidity should never be assumed. For advisers, the question is not simply whether the tax planning works, but whether the client could cope financially and emotionally if access to that capital suddenly disappeared for several weeks.

Octopus claims the suspension was needed because a transaction involving part of the underlying portfolio made it difficult to establish a fair valuation. It demonstrates that, in certain circumstances, investors or their executors may be unable to access funds when required. Although the suspension of withdrawals is expected to end in 8 weeks, its effect could lead to more withdrawals, and as a result, it may lead to a long term suspension.

For clients and their financial adviser agents, the key lesson is that Business relief (BR) investments are a very high risk investment, and unlike many trusts or gifting strategies, apart from carrying investment risk, they also carry valuation risk, concentration risk, and liquidity risk. As a result, they are better avoided.

I also expect the FCA will look into how these investments are promoted, because there could be cases of breaching the new customer duty rules, which request financial advisers to put the client's interest above their own.