With just a month to go to the end of the tax year, VCT managers are concerned that only a tiny proportion of IFAs look beyond the tax breaks when deciding whether VCTs are suitable for a client.Research from the Noble Group, an investment bank with offices in Edinburgh and London, finds that almost 60 per cent of IFAs say they are confused by VCTs. Given that VCTs have been around for the best part of a decade, managers are surprised at the lack of knowledge in the IFA sector. Liquidity, where the underlying investments will be made, even the track record of the manager and management group all play second fiddle to 40 per cent tax breaks in the minds of most of IFAs, according to one VCT manager. He says: “It is something that we are finding frustrating. We talk to IFAs and they are saying that sounds like a nice product but we will wait for clients to come to us for a VCT first before we do more research on it and decide whether to recommend it.” He adds he has noticed that most IFAs who are promoting VCTs to clients are doing so in a generic way and are refusing to do any more detailed research into the 40 products currently being marketed unless requested by clients. This is despite the fact that most of the IFA networks offer pooled research on VCTs. What concerns him most is that by the time the majority of IFAs get around to educating themselves on VCT funds, Chancellor Gordon Brown could have scrapped the current 200,000 investment limit and, most pro-bably, the 40 per cent up-front tax relief along with it. David Knight, of investment consulting group Allenbridge, agrees that there is a limited time left for IFAs to wake up to the role that VCTs could play in client portfolios. He says: “If a VCT is just sold on the basis of the up-front tax break, that would be quite wrong.” IFAs have to consider liquidity, as getting client money out in anything under 10 years could be difficult. Knight emphasises that VCTs have to be viewed as a long-term investment and IFAs have to understand and explain to clients that if they have to get their money out before that, then it will be at a discount to net asset value. Allenbridge offers an information and research service to IFAs. The group also has a VCT rating system although Knight cautions against anyone who might be tempted just to opt for 3A-rated funds without taking a look at what the money is going into. A manager of a separate VCT says he is staggered that many of the IFAs he speaks to do not even ask where the money would be going once it is raised. The fact they intend to put money in one of the most successful areas of private equity investment – management buyouts and funding companies’ expansion plans – has been lost on IFAs, who he feels would not know a generalist from a specialist fund. Knight makes the point that there is a lot of advice and assistance available to IFAs looking to educate themselves on VCTs but IFAs have to be willing to put in the time. The four VCTs which are sitting with 3A ratings at present all attracted the top rating because of the track record of the managers and the management groups behind them. The four are: Baronsmead VCT C shares, Close Aim D share, Close income and growth and Pennine Aim 5. Knight says they are about to be joined at the top by Invesco Perpetual’s Aim VCT and he has been impressed by the fund-raising efforts of its manager Andy Crossley. Noble Group is another of those ready and willing to help IFAs in understanding VCTs before this tax year ends. The group has been hosting a series of seminars for IFAs around the country in the last month. Noble director Patrick Booth-Clibborn feels strongly that IFAs should view VCTs as an attractive investment but he says that most of the seminar delegates came with a degree of understanding of VCT tax breaks but little else. Noble takes advisers through the different types of VCTs – specialist, generalist, technology and Aim – explaining where each trust looks for investment returns. The firm has invested a lot of time in looking behind the marketing brochures and has picked its favourites in each of the four categories – Invesco Perpetual in Aim, Enterprise in generalist, Quester 5 in technology and UniVen in specialist. But Booth-Cliboorn cautions that IFAs could well be in the last chance saloon when to VCTs in time for their clients to get the generous tax breaks. He says: “The extra 20 per cent of relief on top of the existing 20 per cent expires on April 5, 2006.”
Skandia has been accused of protectionism after refusing to set up links between an IFA firm’s in-house fund of fund range and its own onshore bond.
Section 32 Transfer Plan
SimplyBiz and Mortgage Support Network have launched joint venture company Broker Support Services aimed at supporting directly authorised mortgage intermediaries.
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The pension versus Isa debate has raged on and off for years. Les Cameron, head of technical at Prudential, asks if three’s a crowd. I think the debate was arguably settled by pensions freedom when the biggest downside of pensions – limited access and poor death benefits – was fundamentally changed. Total access, albeit with […]
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