A survey of financial advisers for our Enterprise Investment Scheme Industry Report 2019/20 found that most expect to see their use of EIS to increase over the next year

The rule changes enacted at the 2018 Spring Budget appear not to have deterred the majority of our cohort’s investors when it comes to EIS. Half of our respondents have seen no change in attitude, while 12% have even witnessed a change in favour of EIS. This will be welcome news to the EIS industry, suggesting that appetite for investing in EIS products remains robust and the focus on taking greater risk may have actually fired the imaginations of some investors.

It also suggests that advisers are increasingly comfortable with the changes in the rules and now feel that they understand the market. They may also be gaining real confidence in recommending EIS products because they believe there are unlikely to be any further significant rule changes in the near future.

Last year we asked whether the risk to capital changes had made it easier or harder to recommend EIS products, when 36% responded that it had made it harder. This year’s survey reveals that a similar proportion of advisers (38%) see a change in attitude away from EIS.

This suggests that as the changes now bed down, a significant minority of advisers and investors may move away from EIS opportunities – but a strong majority will remain. This fits well with the general view that there will be a reduction in EIS investment when the first figures taking into account the risk to capital changes are published in 2020.

As suggested from the previous question, over half of advisers see EIS as an area of growth for their businesses over the next 12 months. Just 12% of our cohort expect their EIS work to decrease over the period, suggesting that the risk to capital condition has not materially impacted the willingness of many to invest in EIS.

However, the proportion expecting to see a decrease in work has risen compared to last year’s survey, when just 2% of respondents expected their EIS work to reduce.

The results here may suggest that advisers have now got a better handle on the EIS risk to capital changes and recognise when is and is not an appropriate time to recommend an investment under the scheme.

This article was first published in the Enterprise Investment Scheme Industry Report 2019/20. To download the full report for free, click here

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