BR Report 2019

66 67 CONCLUSIONS REPORT CONCLUSIONS OUR FINDINGS Certainty and Uncertainty You might be getting fed up with the number of times this report mentions ‘uncertainty’. But there’s no escaping it. And its impact on the investments universe can’t be ignored. In Q4 2018, market volatility, including AIM, was heightened and BR managers focused on AIM investments took a hit. But some BR managers showcased their skills and significantly outperformed the benchmarks, while liquidity remained relatively strong and diversification grew. Not to mention a rebound in prices. But, for the time being, the chances of more turbulence look high, bringing with them opportunities for undervalued acquisitions and future growth for the longer term investors who generally invest in BR. That said, the chances of 40% IHT in the absence of estate planning for estates valued above the nil rate band, are 100%. Confidence high among BR managers along with IHT receipts The prospect of the OTS report on IHT made for an extended period of nerviness for BR stakeholders. In the absence of the report itself, there were concerns about how IHT and BR might be affected. The publication of the first report has soothed those in the ‘you never know’ camp, with positivity about the way BR is working. While a second report is still due, the spotlight of complexity looks set to focus more heavily on the residence nil rate band. The increase in minimum subscription amounts, reduction in AMCs and higher returns targeted in more recent offers signals growing confidence among BR managers. And with post-Brexit economic forecasts and an intensifying government concentration on IHT collection, it’s hard to foresee any dilution of IHT in its current format any time soon. Advisers confidence in BR also remains strong, with our survey results showing that less than 4% of advisers surveyed in March/April 2019, a period of repeated parliamentary deadlock about how to proceed with Brexit, view it as harder to recommend in this context BR Managers are accustomed to defensive strategies This is a market in which a client’s funds, often built up during a lifetime of work, are put at risk. So, make no mistake, even growth focused AIM BR managers pay substantial attention to keeping capital safe. Our research shows that, even though BR managers are keen to keep their investment options open, the increase in generalist offerings masks some well- established sector preferences. And those sectors have some strong drivers that benefit from a degree of separation from economic conditions. Expertise is key Given the current conditions, this is not a time to go it alone. But, while there may be increased scrutiny of all estate planning, there is certainly plenty of scope for new opportunities. Despite a half a billion pound downgrade of IHT receipts projected for 2022/23, just under £6 billion is expected to fill up the government’s IHT coffers. Both independent and HMRC analyses identify the greater use made of BR by higher value estates as an influence on the lower tax rates paid by them. Despite, or perhaps because of the differing concentration of assets within higher value estates, the possible BR benefits for smaller estates are clearly worth exploring. Then, in the right circumstances, there is a case for the utility of BR alongside pensions. While certainly not a pension substitute, there is growing evidence of the need for tax-efficient vehicles for the funds now being excluded from pensions by allowance limits.