EIS Industry Report 2019/20

38 39 ADVISER SURVEY ANALYSIS WHAT DOES THE ADVISORY COMMUNITY MAKE OF EIS? This survey was conducted over a period of four weeks from the end of July 2019. This is different to our previous surveys for these reports, which were conducted over the course of a year. We have made the change because we feel that a lot of things can happen over the course of a year, particularly in the current political and economic climate. As a result there are fewer responses than last time, but we hope this approach gives a timely and focused snapshot of the market as it appeared to advisers in those four weeks. We had 60 responses and are very grateful to all of those who participated. Their answers provide valuable insights, although it’s worth remembering that many of those we reach out to are already involved in tax efficient investments to some degree. HOW OFTEN DO YOU RECOMMEND EIS INVESTMENT TO YOUR CLIENTS? Unsurprisingly, given that many of those we reach out to are already involved in the tax efficient investments world, the vast majority of respondents do recommend EIS opportunities. Since our last survey, the proportion of respondents who frequently recommend EIS products has increased, from 17% in our 2018/19 report, to 23% today. This could partly be down to the fact that both advisers and investors have had a bit more time to get their heads around the risk to capital requirements and as such are more at ease with the new rules than a year ago. This signals a growing core of advisers for whom EIS is regularly useful. However, the overall proportion of advisers recommending EIS products to their clients has fallen, from 88% last year to 82% this year. This does suggest that some advisers feel that the risk to capital requirements may have taken the scheme out of the reach of their clients and as a result they are no longer recommending EIS products. Given that the vast majority of advisers are likely to be dealing with clients for whom wealth preservation is their primary aim, it is not surprising to see a fall in the proportion of advisers using EIS. FREQUENTLY SOMETIMES NEVER 23% 59% 18% The rule changes enacted at the 2018 Spring Budget appear not to have deterred the majority of our cohort’s investors when it comes to EIS. Half of our respondents have seen no change in attitude, while 12% have even witnessed a change in favour of EIS. This will be welcome news to the EIS industry, suggesting that appetite for investing in EIS products remains robust and the focus on taking greater risk may have actually fired the imaginations of some investors. It also suggests that advisers are increasingly comfortable with the changes in the rules and now feel that they understand the market. They may also be gaining real confidence in recommending EIS products because they believe there are unlikely to be any further significant rule changes in the near future. Last year we asked whether the risk to capital changes had made it easier or harder to recommend EIS products, when 36% responded that it had made it harder. This year’s survey reveals that a similar proportion of advisers (38%) see a change in attitude away from EIS. This suggests that as the changes now bed down, a significant minority of advisers and investors may move away from EIS opportunities - but a strong majority will remain. This fits well with the general view that there will be a reduction in EIS investment when the first figures taking into account the risk to capital changes are published in 2020. DO YOU SEE YOUR USE OF EIS INCREASING OR DECREASING OVER THE NEXT YEAR YEAR? As suggested from the previous question, over half of advisers see EIS as an area of growth for their businesses over the next 12 months. Just 12% of our cohort expect their EIS work to decrease over the period, suggesting that the risk to capital condition has not materially impacted the willingness of many to invest in EIS. However, the proportion expecting to see a decrease in work has risen compared to last year’s survey, when just 2% of respondents expected their EIS work to reduce. The results here may suggest that advisers have now got a better handle on the EIS risk to capital changes and recognise when is and is not an appropriate time to recommend an investment under the scheme. 3% Significant 2% Significant 35% Slight 10% Slight 50% NO CHANGE CHANGE AWAY FROM EIS CHANGE IN FAVOUR OF EIS HAVE YOU NOTICED A CHANGE IN ATTITUDE TO EIS FOLLOWING THE SHIFT TO GROWTH CAPITAL FROM CAPITAL PRESERVATION? 52% of advisers see their use of EIS increasing over the next year 36% NO CHANGE 52% INCREASING 12% DECREASING Market Research / Adviser Survey Analysis