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A. Respondents were asked whether they
agree or disagree with this statement.
Only 32% believe that EIS investments
only become appropriate once other
tax efficient saving/investment vehicles
have been used up. The majority believe
that EIS can sit alongside these other
options as they can offer other benefits,
such as interesting investment concepts,
diversification and high returns, which
cannot be found through ISA and
pension held investments. EIS are also
often used to offset capital gains and
for inheritance tax planning, advantages
which don’t come with ISAs or pensions.
A. 58% of the advisers surveyed said they
had increased their use of EIS investment
in client portfolios over the last 12 months.
This could be attributed to a number of
factors including an increase in the size
of companies receiving EIS investments,
an increase in the amount investors
can invest into EIS in a single tax year
and also a reduction in annual pension
contributions and the lifetime allowance.
There may also have been appetite from
investors looking to offset capital gains
achieved elsewhere due to the relatively
strong performance of property and
equities over the last 12 months. Added
to this, there has also been an increase
in promotion and awareness in the
sector and an increase in the number of
opportunities available, which could have
made EIS more attractive to advisers.
A. When asked whether their use of EIS
investments will change over the next 12
months, 53% of advisers believe this will
increase, while 42% feel it will stay the
same. Only 5% see a decrease, although
it is unclear why they think this is likely.
As advisers increase their knowledge and
understanding of the market, develop
long-term relationships with EIS managers
and as managers begin to evidence
strong track records of success it is likely
to lead to more use of EIS investments
by advisers. On the other hand, if the
government cuts support for the sector, or
the UK economy falls back into recession,
this picture could change dramatically.
Q. For what reasons do you NOT
recommend EIS funds to your clients?*
A. There wasn’t a particularly high response
rate to this question, but the most
common reasons cited by respondents
for not recommending EIS funds to their
clients include that they are deemed too
high risk or the exit strategy is unclear.
Respondents also prefer the flexibility
and control of picking single company
EIS investments, which could result in
investments that are more suitable to their
clients. As echoed elsewhere, advisers
also feel that fund management costs
are too high and there is not enough
information provided on the underlying
investments. These are two areas which
need to be addressed by EIS managers.
Q. EIS are only appropriate when both
ISA and pension allowances have been
maximised
Q. Did your use of EIS in client portfolios
change over the last 12 months?
Q. Do you see your use of EIS in client
portfolio changing over the next 12
months?
“Increased knowledge of the market, long-term relationships with EIS managers and
a strong track record of success should lead to more use of EIS investments by advisers”
*Answered by the 10 respondents who only recommend single companies. Respondents could tick more than one answer.
