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A. Being an education and content provider
this is a very interesting question for
us. 72% of advisers feel that there are
not enough resources and information
available on the EIS sector. Although the
EIS has been available since 1994 and
there are a number of well-established
managers in the market, advisers feel that
they still do not have enough resources
to gain the whole of market knowledge
they require to fully understand the sector
and recommend these products to their
clients. It seems there is definitely scope
for more education and training in this
space, which should ultimately improve
the market for everyone involved.
A. Advisers were asked whether they
recommend EIS to HNW and sophisticated
investors or ordinary retail investors
(they could also tick both). Unsurprisingly
the vast majority only recommend EIS
to HNW and sophisticated investors,
with only 16% seeing them as suitable
for ordinary retail investors.
EIS investments generally involve a large
amount of risk and capital can be tied
up for a number of years. The tax reliefs
offset some of this risk, but the majority of
ordinary retail investors will not be higher
rate tax payers and therefore will not
receive the maximum benefit from these tax
breaks. Therefore HNW and sophisticated
individuals are usually considered a better
fit for EIS investments as they will take
full advantage of the tax relief available,
have a greater understanding of both
the underlying investment and the risks
involved and also have a greater capacity
for loss should the investment fail.
A. The typical age of an EIS investor is
between 40 and 65 years old. Investors
in this age group will usually be at (or
approaching) the peak of their working
life (and income), may have children
that have recently flown the nest and
will be focused on building a portfolio of
investments to provide for their retirement.
They may also have surplus income
which they can afford to allocate to
riskier investments such as EIS in
the search of higher returns.
Only 11% of advisers recommend EIS
investments to investors below the age of
40 or above the age of 65. Younger investors
may not have the capital to allocate to
these types of investments as they are
likely to be focused on buying a property
and/or starting a family. However, there is
potential for growth from this age group
as they pay more attention to saving for
retirement, and they may also have a
higher capacity for loss, as any losses can
be made up through future earnings.
Investors in the over 65 age group are
likely to be in retirement and therefore
would not take on investments that could
risk their retirement income. They may
though consider EIS for the potential
Inheritance Tax relief available.
“Advisers need good quality information covering the nature of EIS, the practical process of investing
and the many ways of using EIS as part of a broader financial strategy”
Andrew Sherlock, Oxford Capital
Q. Do you feel that there are enough
resources and information available to
enable advisers to achieve whole of the
market knowledge of the EIS sector?
95%
16%
HNW and
Sophisticated
Ordinary Retail
Investors
Q. What category of client do you
recommend invest in EIS funds?
Q. What age is your average EIS investor?
Q. Which EIS investment managers and
platforms have you had dealings with?
A. Octopus Investments was by far the
most widely known EIS manager with 95%
of advisers having dealings with them.
This is likely due to their track record and
existence in the EIS market for a number of
years. Other well-known managers include
Ingenious Media with 58% and Oxford
Capital and Foresight, both with 42%, and
managers with a smaller presence including
MMC with 11%. It appears advisers stick to
managers that they have had previously
good experiences with, making it hard for
new entrants or competitors to attract
these advisers. Many of the advisers
questioned had not used a manager that
wasn’t listed above. Interestingly just over
a quarter of advisers use only one EIS
manager, but some use as many as nine
and a large number use between five and
seven managers. On average advisers use
between three and four EIS managers.
Other EIS managers and platforms that
advisers use include Kuber Ventures,
RAM Capital, Downing, Motion Picture
Capital, Triple Point and Par Equity.