BR Report 2019

44 45 WITH THE UNCERTAINITY OF BREXIT AND ITS POTENTIAL IMPACT ON INVESTMENT PERFORMANCE, HAS THIS MADE BR EASIER OR HARDER TO RECOMMEND? DO YOU PREFER EXPOSURE TO AIM OR PRIVATE COMPANIES FOR BR INVESTING? DO YOU HAVE ANY CONCERNS ABOUT POTENTIAL RULE CHANGES TO BR AS A RESULT OF THE OTS IHT REVIEW? HOW HAS THE RESIDENCE NIL RATE BAND AFFECTED THE ESTATE PLANNING YOU HAVE UNDERTAKEN WITH CLIENTS IN THE LAST YEAR? DO YOU SEE YOUR USE OF BR INCREASING OR DECREASING OVER THE NEXT TWO YEARS? Even though the current political and economic backdrops appear to have significantly affected what advisers are concerned about within BR, in March/April 2019, a period of repeated parliamentary deadlock about how to proceed, less than 4% of advisers (who recommend BR), viewed it as harder to recommend as a result. This speaks to the strength of BR as an estate planning tool no matter what the wider context. No advisers reported a significant impact of the RNRB on amounts that might be considered for BR investment*. But the proportion noting no effect has dropped slightly from 30% last year, while just under 73%, a 5% increase on 2018, reported a slight reduction in the amount of funds liable for IHT and for which BR might be considered. This indicates a very gradually increasing impact on BR by the RNRB. As we noted last year and, as other sections of this report suggest, it also suggests high usage of BR by estates that are too large to be able to use the RNRB and where it has therefore had little effect. There has been a dramatic drop in the percentage of advisers who express no preference between AIM and private companies. Last year it was just under two thirds, this year it is just over a third. Two thirds of the shift has moved to private companies and bearing in mind recent AIM volatility, that is understandable. However, with a shift also to AIM, there is a question over whether advisers are becoming keener on focusing on just one of the binary options. Could it be that they are becoming more comfortable building knowledge and experience in one or the other and specialising mainly in that? As with last year, no advisers saw their use of BR decreasing in the next two years. There has been a slight shift with just over 2% more expecting it to stay the same, but the positivity remains very high with over three quarters predicting an increase. Advisers are also confident in the legislative structure of BR, with minimal concerns over rule changes after the OTS IHT review. WHY PRIVATE COMPANIES? WHY AIM? Interestingly in view of recent AIM volatility, there is greater focus on the importance of capital preservation this year than last when it accounted for 78% of advisers’ reason for preferring private companies. While all current AIM BR offers target growth, many private company offerings target capital preservation as part or all of their strategy. BR managers tend to have greater control in private companies where there are fewer shareholders and there is more opportunity to influence board decisions. Liquidity was the top reason last year, with 50% of advisers selecting it as their top reason for preferring AIM. This year, ’greater transparency’ is over three times more important than last year (in 2018 just 12.5% of advisers cited it as one of their top three reasons), while ’easier to measure volatility and performance’ has remained fairly static. So, the opportunity that AIM gives for advisers to see what is happening and to track performance in real time has become a much bigger driver for advisers who prefer AIM. R. GREATER FOCUS ON CAPITAL 90% LESS VOLATILITY 10% GREATER TRANSPARENCY 43% EASIER TO MEASURE VOLATILITY AND PERFORMANCE 36% GREATER LIQUIDITY 21% 26% 38% 36% PRIVATE AIM NO PREFERENCE 78% INCREASING Market research / Adviser survey analysis Market research / Adviser survey analysis EASIER HARDER STAYED THE SAME *SLIGHTLY REDUCED AMOUNT NO EFFECT SIGNIFICANT SLIGHTLY CONCERNED NO CONCERNS ? 69% 2% 29% 73% 27% 92% 4% 4%