BR report 2018

45 44 DO YOU SEE YOUR USE OF BR INCREASING OR DECREASING IN THE NEXT TWO YEARS? DO YOU PREFER EXPOSURE TO AIM OR PRIVATE COMPANIES FOR INVESTING? Advisers appear to be very positive about their future use of BR. 80% of respondents said that they would be increasing their use of BR over the next two years, with none predicting their use decreasing. Last year, 68% of advisers predicted that their usage would increase over two years. This indicates that BR is growing in popularity among the adviser community. Advisers in our survey only showed a slight preference towards using private companies (19.1%) for BR investing, and approximately 64% of advisers had no preference whatsoever. In last year’s survey, 23% of advisers preferred the exposure to private companies. AIM investing also appears to be growing in popularity. This year 17% of advisers cited a preference towards AIM BR products, whereas last year that figure stood at 10%. Half of advisers that indicated a preference towards AIM BR investments did so due to greater liquidity in AIM securities. 37.5% chose AIM because of its perceived greater transparency, as it is present on a secondary market. 8.5% 31.9% 80% INCREASING 20% STAY THE SAME 0% DECREASING “Investors are increasingly looking for alternative investment opportunities where they retain access to and control of their assets. Business relief provides this.” — SIMON HARRYMAN, INVESTMENT DIRECTOR, INGENIOUS PRIVATE AIM NO PREFERENCE 19.1% 17% 63.8% Of the advisers that displayed a preference towards private company BR investments, nearly 78% said that the reason was because of a greater focus on capital preservation. Providers tend to have a greater amount of control when it comes to private companies, and can select investments that have a lower risk profile. Approximately 22% of respondents said they focus on private companies because there tends to be less volatility than AIM investments. All open AIM BR offers, as of March 2018, have either Growth or Growth & Income strategies – which tend to lend themselves to greater volatility. WHY PRIVATE? WHY AIM? LESS VOLATILITY THAN AIM GREATER FOCUS ON CAP. PRESERVATION ADVISER ROUNDTABLE VIEW FROM ADVISERS WHAT IS YOUR PREFERRED ESTATE PLANNING SOLUTION? HOW HEAVILY IS BR INTEGRATED INTO YOUR CLIENTS’ STRATEGIES? WH: We don’t have a preferred solution but review what might be suitable based on individual client circumstances and objectives. For example, if capital preservation is key then an asset-backed or lending BR solution might be appropriate, whereas if we are using BR for a small proportion of a client’s assets or they have the capacity to accept a greater level of risk, then an AIM solution might be more suitable. For those clients with IHT issues, high incomes and/ or CGT liabilities, we might also look at Enterprise Investment Scheme (EIS) as a possible option, though we don’t look at EIS as a pure BR solution but part of wider tax planning. BR on EIS is usually an added extra in these circumstances. We do not go out of our way to integrate BR into client strategies, but will always consider it as an option for clients with significant assets or in advancing years where they have done little estate planning. JC: We tend to use BR for people in our client bank who are a little bit older, and for clients who want to retain access to the funds. We’re in a relatively fortunate position, our client base is quite wealthy, so a lot of our clients are happy to forego the access. In that case, we’d look to use discretionary trusts. BR is getting more and more integrated, but we tend to explore other things prior to using it. JG: We don’t have a preferred solution. It could be a trust, it could be BR, it really depends on the parameters of the client setting. BR comes into play where clients may have done trust planning in the past, but are particularly concerned about losing access to the capital or income. As clients move into later life, care costs are the one thing that they continually worry about. So placing money beyond their reach in a trust gives them that feeling of insecurity. AT: BR is a topic I raise with all clients. It’s rare that clients within five years of retirement do nothing to plan for succession planning and managing IHT. Most people are a bit sceptical. Unless they’re entrepreneurs themselves, then obviously they know full well what BR is about. But the average high net worth client who isn’t a business owner in their own right, their knowledge of BR is pretty limited. DOES THE INTRODUCTION OF THE RNRB AFFECT HOW YOU ADVISE ON BR? CH: Only if they’ve got substantial estates, which is not always the case. A lot of clients are certainly pleased that it’s been introduced. In terms of the effect on using a BR solution, I wouldn’t say it’s changed too much how I advise the clients. WH: Other than advising clients that mistakenly think BR helps to reduce the value of the estate for the purposes of calculating the RNRB, this has not had much bearing. JC: No, because the clients we’re looking at are far over the threshold of the RNRB, so it hasn’t affected us so far. AT: Almost no impact. My clients tend to have significant IHT liabilities so it has a marginal impact, albeit a positive one. ATTENDEES MODERATOR: JOHN SCHAFFER INTELLIGENT PARTNERSHIP JOHN SCHAFFER INTELLIGENT PARTNERSHIP ANDREW TUSTIN (AT) PARTNERS WEALTH MANAGEMENT CARL HANSON (CH) SANLAM JEREMY GOODMAN (JG) OCULUS WEALTH JOHN CUNLIFFE (JC) EDISON CONSULTING WESLEY HARRISON (WH) INVESTEC 22% 37.5% 12.5% 78% 50% “We do not go out of our way to integrate BR into client strategies, but will always consider it as an option for clients with significant assets or in advancing years where they have done little estate planning.” — WESLEY HARRISON, INVESTEC GREATER TRANSPARENCY GREATER LIQUIDITY EASIER TO MEASURE VOLATILITY AND PERFORMANCE