65
Q
.
Do rumours that the IHT threshold
may rise make you hesitate to
recommend BPR products?
Inheritance tax only got one mention
in 2015 Budget, in relation to deeds
of variation. Most advisers are not
letting the possibility of a rise in the
IHT threshold hold them back from
recommending BPR products.
Perhaps either their clients are elderly
and need BPR immediately, or they are
healthy and planning ahead in which
case their estates are likely to grow and
outstrip the growth of the nil rate band.
In both cases, it means that changes
to threshold are not an important
consideration.
The tensions in BPR we have highlighted
throughout the report - how to balance
liquidity with risk and returns while
investing in smaller companies - are
apparent in advisers’ concerns. Liquidity
and investment risk were the two biggest
concerns. The lack of transparency and
difficulty assessing the products was
the third highest concern. All three of
these may be linked, as advisers might
be able to get comfortable with liquidity
and investment risk if they have a clear
look-through to the underlying investment
portfolio, which is not always the case
with BPR products. Finally, as always,
costs were a concern. For advisers,
when it comes to managing their clients’
investments much of what happens is out
of their control - but costs are a known
variable and so are rightly scrutinised.
It was really interesting to see both investment philosophy and the management
team score so highly as criteria for choosing a product provider. In surveys of
mainstream asset classes past performance is invariably the leading criteria. In the
BPR market investment performance can be harder to evidence, and is less important
than capital preservation. It seems that this means advisers place more weight on
the house style and personnel, and this could be backed up by the high score for
the quality of the marketing literature, where managers have the opportunity to
showcase themselves.
That’s not to say that more quantitative measures are ignored though - past
performance, costs and assets under management all scored highly.
Q
.
What are your
top 5 criteria
when choosing a BPR product provider?
“Advisers place more weight on the house style and personnel”
69
%
31
%
Q
.
What are your
top 5 concerns
when investing in a BPR product?
Lack of liquidity /
Concern that deal
flow will dry up for
the providers
92
Fear of investing in
non-mainstream
assets
36
Too much risk
to my business
(regulatory risk)
35
Lack of transparency
/ Hard to understand
/ No past performance
to assets
73
Investment
risk
87
Fear of investing
in an esoteric tax
avoidance scheme
24
Too much due
diligence and
compliance work
required
29
Too
expensive
54
Other
7
6
84
73
71
70
57
42
41
13
11
The investment philosophy
Costs
The management team
Past performance
Quality and transparency of supporting literature
Size
Having used them previously
Other
Interaction at events / seminars
As measured by AUM
