BR report 2018

43 42 WHAT PERCENTAGE OF YOUR CLIENT BASE IS BR SUITABLE? DO YOU TYPICALLY HAVE A PREFERRED BR QUALIFYING INVESTMENT OR IS YOUR RECOMMENDATION BASED ON A CLIENT’S CIRCUMSTANCES? HOW CONFIDENT ARE YOU IN GOVERNMENT SUPPORT FOR BR? HOW HAS THE RESIDENCE NIL RATE BAND AFFECTED THE ESTATE PLANNING YOU HAVE UNDERTAKEN WITH CLIENTS IN THE LAST YEAR? WHAT ARE YOUR TOP 3 CRITERIA WHEN SELECTING A BR INVESTMENT? WHAT ARE YOUR TOP 3 CONCERNS WHEN SELECTING A BR INVESTMENT? LESS THAN 10% 50-75% 10-25% OVER 75% 25-50% Over 38% of respondents said that BR was suitable for 10-25% of their client base. Nearly 32% said that BR was suitable for 25-50% of their client base. These figures are rather modest. As the UK population continues to age, these figures are likely to rise as more financial advisers work with middle aged or elderly clients, and estate planning becomes an even more integral part of the adviser’s role. According to our survey, advisers did not display any preference to a particular BR product, and chose investments based on specific client circumstances. This is, of course, logical when taken in the context of matching the product to the client in terms of suitability considerations. Over 55% of advisers are largely confident in the government’s support of BR, and over 10% are very confident. Only 6.4% of advisers displayed concern over the government’s support of the tax efficient scheme. This is encouraging, as if advisers are confident in the scheme, then they will not hesitate in recommending BR to their clients. In turn, this will benefit fledgling UK companies. With the introduction of the residence nil rate band in April 2017, the impact on BR uptake has not been drastic. Approximately 68% of advisers said there was a slight reduction in the amount of funds liable for IHT, and thus for which BR might be considered. However, nearly 30% of respondents said that there had been no effect at all on BR subscriptions with the introduction of the RNRB. Only 2.1% of advisers saw significantly reduced amounts of funds for which BR might be considered. This suggests that BR is mostly used in instances where the estate is worth over the threshold of the RNRB. It also suggests that usage of BR is the preserve of high net worth individuals, if there has not been a significant shift in the way BR is being used. 21.3% 38.3% 31.9% 8.5% “Over 72% of advisers cited transparency of underlying assets as a top 3 criteria for selecting a BR investment.” “30% of respondents said that there had been no effect at all on BR subscriptions with the introduction of the RNRB.” Over 72% of advisers cited transparency of underlying assets as a top 3 criteria for selecting a BR investment; this is up from 64% in 2017. Performance history (57.4%) and provider reputation (51.1%) are also important to advisers. Compliance and due diligence (46.8%) was themost frequently cited concern among advisers when selecting a BR investment, closely followed by lack of liquidity (44.7%) and investment risk (42.6%). Concerns over compliance and due diligence have increased from last year, where only 27% of advisers cited this as a top three concern. Lack of liquidity concerns have increased marginally from last year (43%). Concerns over track record have increased from 19% last year to over 21% this year, with advisers showing a greater interest in the underlying investments and measurable performance. HMRC challenge was also a notable concern for advisers, with nearly 30% citing it in their top three concerns. Last year, only 18% of advisers cited this as a top concern. Part of the reason for this may be the government’s tightening the rules of tax-efficient schemes, such as EIS and VCTs. COMPLIANCE AND DUE DILIGENCE HMRC CHALLENGE LACK OF LIQUIDITY LACK OF TRANSPARENCY INVESTMENT RISK NO TRACK RECORD SUITABILITY PROVIDER’S FINANCIAL STRENGTH EXIT RISK PROVIDER’S REPUTATIONAL STRENGTH SECTOR REPUTATION 46.8% 44.7% 42.6% 38.3% 34% 29.8% 29.8% 21.3% 6.4% 6.4% 4.3% 40% 50% 30% 20% 10% 0% TRANSPARENCY OF UNDERLYING ASSETS PERFORMANCE HISTORY PROVIDER REPUTATION INVESTMENT PROCESS THIRD PARTY REVIEWS PREVIOUS EXPERIENCE WITH PROVIDER OTHER 72.3% 57.4% 51.1% 46.8% 42.6% 27.7% 4.3% 60% 80% 40% 20% 0% PREFERRED BR INVESTMENT BASED ON CLIENT CIRCUMSTANCES VERY CONFIDENT LARGELY CONFIDENT NEITHER CONFIDENT NOR CONCERNED CONCERNED VERY CONCERNED NO AFFECT SLIGHTLY REDUCED AMOUNT OF FUNDS LIABLE TO IHT + FOR WHICH BR MIGHT BE CONSIDERED SIGNIFICANTLY REDUCED AMOUNT OF FUNDS LIABLE TO IHT + FOR WHICH BR MIGHT BE CONSIDERED 17% 83% 27.7% 6.4% 55.3% 10.6% 68.1% 29.8% 2.1%