AIM Industry Report 2017/18

40 41 DO YOU SEE YOUR USE OF AIM FUNDS OR SHARES INCREASING OR DECREASING OVER THE NEXT TWO YEARS? The number of advisers who see their use of AIM investments increasing has grown significantly this year, from 41% to 55%. 21% of advisers would keep their current level of use, which is slightly down from last year’s 25%. Only a very small proportion of advisers see themselves decreasing their use of AIM, with almost seven in 10 of those who use it sometimes predicting an increase in AIM business. This is higher than frequent users, suggesting a potential growth in the number of frequent users over the next two years. We have also gathered advisers’ opinions on what development, change and innovation they would like to see in the AIM universe and below is a selection of the comments we received. FREQUENTLY SOMETIMES NEVER 80% 40% 70% 30% 60% 20% 50% 10% 0% INCREASING DECREASING ABOUT THE SAME Zombie companies removed from AIM Justification for high P/E ratios Consistent performance Relevant AIM Index More public awareness Greater retail access Transparency & clear exit option Lower charges More readily available analysis for smaller advisers “With rising levels of knowledge and awareness around investing in AIM we are seeing increasing interest in a passive service such as ours.”— NIGEL ASHFIELD, TIME INVESTMENTS HOW LONG HAVE YOU BEEN MAKING INVESTMENTS ON AIM AND HAVE YOU NOTICED ANY CHANGES DURING THAT TIME? MS: I’ve been considering AIM since 2012. I certainly think that the AIM market has got a far higher profile over that time. I use AIM for quite a specific reason and that’s for the potential Business Relief that’s available from it. My client base is more elderly clients, but as a firm, we advise businesses on the benefits of AIM holdings to maintain trading status. We consider the merits of holding these assets as an alternative to retaining significant cash funds on deposit, ensuring that we are providing advice on maintaining trading status, that is vital if the client is to benefit from Business Relief in the event of death and entrepreneurial relief on sale and exit. MB: I have been investing in the AIM market for about five years now. Most of that has been via open-ended funds, so operating within AIM and Small Cap indices. And as far as changes go over that time, I think one thing for me is that the number of quoted companies has actually reduced over that period. I think there’s probably a combination of things going on there. If you look at it from the new issue side, we had 73 new companies coming to market in 2012, and that number was 53 over the course of this year. I think the notable markdown has been from international companies. I suspect this is specifically linked to Brexit. But I think in terms of the overall numbers of quoted companies reducing, they’ve been falling since probably 2007, and so there’s something greater at work than the past year or so. I think there seems to be a trend for very large businesses who are under pressure to maintain their margins to try and pick up innovative businesses that have higher margins than them. I believe they are poaching these businesses before they even come to market, and that’s from either very large corporates or even private equity funds, leading to a gradual decline in the number of AIM quoted companies. CG: We’ve been really looking at AIM for about three years as a regular thing for our clients. The majority of our AIM related business is BR, but we do have some EIS and VCT activity there too. I think we’ve seen AIM is a good market to be looking at. NF: On and off, I’ve used the AIM market for virtually the last 20 years, but for our clients particularly in the last 4 or 5 years. As the population is ageing and because of the greater awareness that there are advantages to help mitigate inheritance tax, we’ve had more and more clients come to us wanting to have their investments in the AIM market. As to the changes, I think it’s been very interesting. As a market, it has started to grow up in terms of facilitating larger companies. Larger companies are willing to stay on the market rather than move onto the main market. This clearly gives the clients a wider range, a choice of mature companies. So, there is market breadth in terms of the variety of investments, it’s not just small start-ups. Many years ago, it was a bit more Wild West as an index, but there is a much broader range of companies that are quoted on it now. We use BR qualifying investments on AIM, and indeed our core portfolios are invested in funds that have AIM stocks as well. They are becoming much more mainstream. So, clients are not only looking for the tax benefits, or necessarily adventurous in terms of their risk preference. I mean, we’ve got funds that have AIM stocks in our cautious portfolio, for example. I think it just goes to show how there are companies in there that can suit a range of risk appetites. MSn: We’ve been investing in AIM since AIM was first introduced but probably more seriously since 2002, and over that time the main change I’ve noticed is the perception of the AIMmarket ADVISER ROUNDTABLE DISCUSSING THE MARKET ATTENDEES LISA BEST (LB) MODERATOR INTELLIGENT PARTNERSHIP MIKE SEAGROVE (MS) ALBERT GOODMAN MOHSIN BUKHARI (MB) CARRINGTON INVESTMENTS CHRISTOPHER GREEN (CG) ST. JAMES’S PLACE WEALTH MANAGEMENT NEAL FOUNDLY (NF) EQUILIBRIUM MODERATOR: LISA BEST INTELLIGENT PARTNERSHIP MALCOLM SNOOK (MSn) MPL WEALTH MANAGEMENT CONCLUSIONS Familiarity is an important factor for advisers when it comes to recommending investments on AIM, but those with some experience of AIM investing don’t necessarily stick to their familiar providers to find the best opportunities and for some, these include income plays. With experience, there are also fewer concerns about suitability, due diligence and compliance. So, it’s probably not surprising that more than eight out of 10 advisers who frequently recommend AIM investments to their clients assert that it is not just for high net worth individuals and sophisticated investors. Furthermore, across all advisers, despite its reputation as a risky market, AIM is seen as a good destination for the money of those seeking IHT mitigation. There is also strong recognition of managers’ skills in selecting the best sectors for investment. Most positively of all, a large majority of the advisers with any experience of recommending AIM investments see their use of them increasing over the next two years.