EIS 2018 report (web)

44 45 WHAT ARE YOUR TOP THREE CONCERNS WHEN SELECTING EIS? WHAT ARE YOUR PREFERRED SECTORS FOR EIS? The top 3 considerations last year were Investment Risk (60%), Exit Risk (58%) and Compliance and Due Diligence (47%). The top 2 this year are the same, but lack of liquidity has become a greater concern overall. More experienced advisers have a particular concern about Exit Risk and this appears to support a premise we suggested in last year’s report - that Exit Risk might tick up as a concern as advisers and their clients start to expect to see their money coming back. The top 3 preferred sectors overall are similar to those identified in last year’s report, with the exception of Media & Entertainment which has come into the top 3, with General Enterprise dropping by 7% and Media & Entertainment increasing by 5%. This can be attributed to the increased number of Media & Entertainment offers in the market this year. DO YOU SEE YOUR USE OF EIS INCREASING OR DECREASING OVER THE NEXT TWO YEARS? WHAT ADVISERS WANT IN THE FUTURE The optimism shown in last year’s survey has continued this year, with the overall figure for those who see their use of EIS increasing in the next two years, going up from 73% to 74%. Again, those who use EIS frequently are even more confident in the future value of EIS to their clients. The most notable statistic though, may be that almost half of advisers who never use EIS report that they expect to start using it in the next two years. It will be interesting to see how this recognition of the appeal of EIS is affected by the new rules introduced by the Autumn 2017 budget. Finally, we have an open-ended question asking advisers what they want to see in the future and the following is a summary of their responses: Access to quality due diligence/ benchmarked due diligence. Easier and more research tools. Better diversified fund structures/Broader spread of investments. Clarity on charges, not including tax relief in returns/Fairer charging models. Lower fees. Historic performance figures/ Publication of exit success/failures. Create access to more funds via platforms. Greater transparency. More training. More public awareness. Higher tax relief. Improved administration. Greater clarity from HMRC as to what meets pre approval. Government stimulus. Repeal of recent european legislation. There are clear indications that advisers who use EIS frequently are more positive about its use and who it is suitable for, including retail investors. Tax planning remains the top reason for recommending EIS, with frequent EIS advisers particularly keen on EIS for this purpose, above IHT planning. Advisers don’t just see EIS as a tax planning solution and more experienced EIS users recognise the growth opportunities - for them, Growth is the second top reason for recommending EIS. As the conditions governing EIS qualification become more complex, the value placed on third party reviews has increased. It remains to be seen if the confidence of advisers in using EIS that was expressed before the Autumn budget 2017, is negatively impacted by the changes announced in it. KEY POINTS FROM THE ADVISER SURVEY “Quite a lot of advisers have decried the loss of asset backed investments, but I don’t care. To my mind, all it’s done is clarify the picture.” — STEPHEN JONES, CLEAR SOLUTIONS “More experienced advisers have a particular concern about Exit Risk.” INVESTMENT RISK LACK OF LIQUIDITY LACK OF TRANSPARENCY EXIT RISK COMPLIANCE & DUE DILIGENCE SUITABILITY SECTOR REPUTATION HMRC CHALLENGE NO TRACK RECORD 70% 60% 80% 50% 40% 30% 20% 10% 0% ALL RESPONSES SOMETIMES FREQUENTLY NEVER INDUSTRY & INFRASTRUCTURE FOOD & DRINK GENERAL ENTERPRISE FINANCIAL SERVICES MEDIA & ENTERTAINMENT SECTOR AGNOSTIC 35% 30% 40% 45% 50% 25% 20% 15% 10% 5% 0% ALL RESPONSES SOMETIMES FREQUENTLY ALL RESPONSES FREQUENTLY SOMETIMES NEVER 70% 60% 80% 90% 100% 50% 40% 30% 20% 10% 0% INCREASING ABOUT THE SAME DON’T RECOMMEND DECREASING