AIM Report 2019

40 41 As was the case when we last ran this survey, the vast majority of respondents expect their use of AIM to either increase or stay the same. Just 2% of advisers expect their use to decrease over the next two years, suggesting that AIM is an increasingly attractive and important proposition for advisers and their clients. There has been a large increase in the number of advisers who are expecting to keep their use of AIM funds at about the same level over the next two years, now hitting 50% of those surveyed compared with 21% in our last survey. A number of factors may be at play here. First, almost all of this year’s cohort said they recommend AIM already, while 32% said they did not in the previous survey. Second, many of those that had been looking to raise their involvement with AIM last time around may have done so and now reached a level that they are comfortable with. Another possible explanation is that some may simply be hedging their bets waiting to see how various market uncertainties - notably Brexit - will play out. Regardless, AIM is clearly still an important part of advisers’ considerations when looking at investment options for their clients seeking tax efficiency, and this appears set to continue. 18% 82% DO YOU USE AIM-FOCUSED EIS OR VCT PRODUCTS? WHAT ARE YOUR TOP 3 REASONS FOR NOT USING AIM FOCUSED EIS OR VCT PRODUCTS? WHAT ARE YOUR PREFERRED SECTORS FOR AIM FUNDS OR SHARES? HOW DO YOU SEE YOUR USE OF AIM FUNDS OR SHARES DEVELOPING OVER THE NEXT TWO YEARS? HOW HAVE THE RECENT RULE CHANGES, INCLUDING THE RISK-TO-CAPITAL CONDITION AFFECTED YOUR APPROACH TO AIM-QUOTED EIS/VCT INVESTMENTS? Despite the fact that the majority of advisers see AIM as ideal for inheritance tax planning, the majority are not limiting themselves to BR products. Our respondents recognise the potential to use AIM for EIS and VCT investments (where 100% IHT relief can usually be achieved through BR). Given the changes to the risk to capital requirements, it is heartening to see that 82% still use these products, demonstrating that the combination of AIM and EIS or VCT under the risk to capital conditions presents a risk level that is not too high to consider. It is also likely that the vast majority of those that do use AIM-focused EIS or VCT products would use VCTs (in preference to EISs), given that four AIM-focused VCT offers were launched in the 12 months to June 2019, while there have only ever been five AIM-focused EIS schemes launched (albeit that two of these are evergreen and therefore remain open to investment). Only a relatively small number of advisers answered this question, suggesting that the majority do not consider there to be strong general reasons not to recommend AIM-based products. It may be that most believe the decision is down to the individual circumstances of their clients. Of those that did respond, the top reason was that they were unsure whether AIM investments can meet the new risk to capital requirements for EIS and VCT products. This suggests that at least some advisers remain concerned by the impact of the rule changes, despite the fact that four VCT offers have successfully launched since the new rules came into force. It may mean that more education is required. This issue may also be feeding into the second- highest choice, as the pool of AIM-quoted companies available to EIS and VCT products will be smaller because of the risk to capital condition. As AIM matures and larger companies remain on the market, these are also going to be outside the scope of EIS and VCT in most cases. As in our previous reports, advisers are generally not focused on any particular sector when looking at AIM, instead preferring to leave that detail to the specialist skills of the managers. General enterprise and no preference (sector agnostic) make up the vast majority of responses, demonstrating advisers’ confidence in managers to make the right choices. Where advisers do focus on particular sectors, it is industry and infrastructure that leads the way, with 30% of respondents referencing this sector. Media and entertainment is chosen by just 10% of advisers and again this could be related to the rule changes to EIS and VCTs, which had been thought likely to bring an end to the use of these products in this sector. Launches of non-AIM EIS products during 2019, particularly one in conjunction with the British Film Institute, suggest the sector may yet be able to survive and thrive for EIS and VCT products, so it will be interesting to watch the adviser community’s response to this sector in future surveys. Once again, there is good news here for the AIM market, with the vast majority of advisers not changing their approach to advising on AIM-quoted EIS and VCT investments. Indeed, 10% of respondents said the rule changes had made it easier for them to recommend the products to clients. While this is clearly promising for the AIM market, it is important to note that a fifth of respondents said it had made them more reticent to recommend these products to clients. This may be because these advisers had traditionally used EIS and VCT products generally for less risky investments, whether on AIM or not. YES NO 1 Unsure whether AIM investments can meet risk to capital condition for EIS & VCT 55% 2 Not broad enough investment universe of qualifying companies 44% =3 Volatility makes AIM too risky 33% =3 Not enough control over investee companies 33% Client perception of AIM riskiness 22% 30% INDUSTRY & INFRASTRUCTURE 12% FOOD & DRINK 10% MEDIA & ENTERTAINMENT 4% FINANCIAL SERVICES 32% GENERAL ENTERPRISE 52% SECTOR AGNOSTIC 10% EASIER TO RECOMMEND 20% MORE RETICENT TO RECOMMEND 70% NO CHANGE Market research / Adviser survey Market research / Adviser survey