Last October we asked our subscribers to give their views on a variety of issues relating to the market for tax efficient investments. Of the 140 financial adviser subscribers to Tax Efficient Review, a total of 82 firms responded (together these firms employ in excess of 2,500 approved persons, 20 per cent of whom have been specifically authorised to advise private clients on tax efficient investments).
Key findings are: Why do people use tax efficient investments?
Seed EIS Investments
However, only 12 per cent of respondents are planning to actively advise clients on the new Seed Enterprise Investment Scheme; 25 per cent have decided not to use this new tax efficient investment product; while 48 per cent remains undecided.
Interest by type of product
When broken down by VCT type and EIS growth or capital preservation strategy we see the following for the previous tax year:
Development Stage of Investee Companies
When selecting investment strategies by the maturity of the investee companies, more than half of respondents favour companies seeking expansion capital as well as funding management buy-outs. This is clearly linked to the perceived lower risk of later stage and more mature companies.
65 per cent of respondents create a panel of products for their clients.
The effect of regulatory changes on advice given to clients
Most respondents in October had already decided how they wish to operate post RDR and didn’t actually expect to be materially affected in their dealings with clients or the regulator:
This year the market for VCTs and EIS is less certain than last year:
Overall the VCT market is still being impacted by Consultation Paper 12-19 (Restrictions on the retail distribution of unregulated collective investment schemes and close substitutes) issued by the FSA in early September 2012, althougoh indications last week suggest the regulator may look to ensure VCTs are excluded from any ban. The full survey can be purchased from the Tax Efficient Review website.
Martin Churchill is editor of Tax Efficient Review