Financial advisers remain supportive of the UK’s growth economy, according to a new survey by Great Point Investments
A survey of financial advisers on Enterprise Investment Schemes has found that the level of use has been consistent despite concern that rule changes brought in by the government as part of its Patient Capital Review would stifle the market. In the survey conducted by Great Point Investments, 56% of the advisers questioned said the number of clients using EIS has stayed the same in the last 12 months. 67% of advisers also said they expect to see the same level in the use of EIS by clients in the next 12 months. 10% said they expect to see an increase and 23% said they expect a fall.
Asked about the impact of the PCR and introduction of new rules, advisers said they have been more inclined to look for proven track record with established EIS funds (49%). This was followed by an increased focus on diversification at both manager level (31%) and asset class level (31%). Advisers also said that PCR had made them less inclined to recommend single company investments (22%) yet more inclined to recommend EIS funds (14%).
Commenting on the results, Great Point Investments MD Dan Perkins said: “This survey clearly shows that EIS continues to be an important part of the wealth planning mix for advisers and their clients. The rule changes have changed the risk profile of EIS and this has brought a sharper focus on investing in genuine growth businesses.
“For clients that want to supplement their pensions, are comfortable with the high levels of risk associated and are looking for a genuine wealth creation tool, EIS offers a great platform for investors and also provides a much-needed alternative source of funding for Britain’s small businesses.”
Among the advisers surveyed, 43% said the typical investment made into EIS in the last 12 months was £20,001 – £100,000, which in Perkins’ view demonstrates that the world of early stage venture capital investing is now not just the preserve of the super wealthy – something that can only be a good thing for the entrepreneurial engine of the UK economy. The survey further identified that the average number of clients IFAs had with current investments in EIS was 15%.
When asked if they agree a change of government would see greater support for investment into the UK’s growth companies, the majority of respondents (62%) disagreed, with only 8% believing that a change would be good and the balance remaining neutral.
Perkins added: “Advisers appear to be concerned about the future of tax efficient investing if there were to be a change in government. However, one could consider this concern to be unfounded, given that EIS has successfully contributed to the growth of the UK economy for the last 25 years and received broad cross-party support throughout that period.
“For every £1 invested in early stage VC, the statistics show that approximately £3.50 has been generated for UK PLC, with tax efficient investments being a significant contributor. It has also proved to be a valid form of alternative investment, bringing diversification to client portfolios and allowing the potential for some great returns.
“It was interesting to note that uncertainty was seen to be one of the biggest barriers to clients investing via EIS – a not uncommon theme generally when it comes to UK industry and the current political climate.”