49
There are a number of conclusions that
can be drawn between the EIS adviser
survey and EIS investor survey. There were
several points where concerns and opinions
expressed in both surveys highlight
important issues with the EIS market. Below
are some similarities and differences that
can be drawn between each survey:
Similarities:
Both growth and exit focused investment
strategies were the most popular amongst
adviser and investors
Poor quality of information and the
complex investment process where cited by
both advisers and investors as factors that
make them hesitant about an EIS
investment
Around 70% of the advisers and
investors felt there was enough competition
in the EIS market
Increased risks associated with EIS
investment often makes them unsuitable
for ordinary retail investors. Both advisers’
clients and private investors tended to be
more sophisticated and in the 40-60 years
age group
Differences:
91% of advisers recommend EIS
investments primarily for the tax benefits,
whereas investors were more focused on
the level of returns available with the tax
benefits being less important
Individual investors favoured single
company investments, while advisers most
commonly recommend an EIS fund or a
mixture of both structures
Renewable energy was a popular sector
among advisers, while being one of the least
popular among private investors
Both advisers and investors felt that the
quality and availability of information is
extremely important to understand the EIS
market, but the majority of advisers feel
there is not enough information available
whereas investors feel that there is. This
could be due to regulatory requirements –
advisers are compelled to educate
themselves to a higher standard to comply
with the rules and evidence due process
We seem to have a situation where advisers
are more cautious about investing in EIS
than sophisticated investors. As noted,
this could be a reflection of advisers’ client
banks that perhaps do not have the same
appetite for risk as the sophisticated
investors we surveyed, or it may reflect
advisers’ concerns around complying
with the regulations and evidencing due
process to the regulator in the event of
a dispute with a client at a later date.
This suggests that advisers’ clients are
missing out on some of the benefits
offered by EIS – and that if EIS investment
providers could overcome advisers’
concerns there might be a much bigger
market of investors out there for them.
MARKET RESEARCH CONCLUSIONS
