Eight EIS masterclass speakers help advisers assess risks to their clients – and themselves
As part of Intelligent Partnership’s growing masterclass programme, I invited eight thought-leaders to answer the big questions for both advisers recommending EIS, and for those who want to feel more confident about doing so. On Thursday 5th March 54 advisors gathered at Lexis Nexis for three hours of structured CPD on topics ranging from how EIS will interact with new pension freedoms to avoiding common misconceptions and pitfalls. Speakers from St James’s Place, Rockpool Investments, Allenbridge IS, Ingenious Investments, Oxford Capital, Bovill, and Time Investments shared insight on tax planning, client segmentation, compliance, diversification, panels and renewables.
#1 A ‘socially useful activity’
Quoting Lord Turner in her opening welcome, Sarah Wadham, EISA Director General highlighted the fact that EIS has supported over 20,000 SMEs. Creating jobs, driving innovation, and enabling the UK to compete overseas, she said EIS is about more than investment returns and actually provides a wider benefit to a really important part of UK plc.
#2 Suitability
There was a consensus that EIS did NOT have to be solely for High-Net-Worth investors – they can be appropriate for other client segments, but each case has to be judged on its own merits, taking into account the existing portfolio and the client’s capacity for loss, timeframes and attitude to risk, amongst other things. Matt Taylor of Rockpool and Tony Mudd of St James’ Place made similar points along these lines and Eddie Grant of Ingenious suggested that EIS are not all created equal when it comes to assessing risk – it is also essential to look at the underlying trade. Bovil’s Gillian Roche Saunders made the key point that the entire advice and product selection process must be documented for the adviser’s audit trail – if it’s not documented, it might as well have never happened!
#3 Diversification
Matt Taylor and Odi Lahav of Allenbridge both suggested it was vital that investment was part of a logical process and not just based on seemingly arbitrary decisions. They also both agreed that EIS should be considered part of the equity allocation within a portfolio and not just pushed into the “other” or “alternative” bucket. This chimed with the feeling in the room that the EIS market was maturing and becoming more mainstream. Each were adamant that diversification was about more than spreading investments over managers and sectors – investment vintages and the life-stage of the investee companies are just as important
#4 Timing
Andrew Sherlock of Oxford Capital argued that EIS does NOT have to be seasonal; pointing out that there are a number of evergreen opportunities in the market and providers are always open for business. In fact, there are some advantages in avoiding the “season” as not all good investments are found in Q1 and Q2, there is less pressure on the investment managers’ capacity, and the tax benefits can be accessed earlier. He concluded by demonstrating how making regular investment to build a portfolio over time can reduce the risk of missing investment at the right point in the business cycle and can increase the exposure to successful exits.
#5 Outlook for the Future
Almost everyone agreed that we were going to see more investment into EIS over the next few years. Nobody felt that EIS could be viewed as avoidance or evasion, or that the scheme would be curtailed by future governments – a view from both the buy and sell side, which was reassuring. TIME Investment’s Henny Dovland peered into her crystal ball and gallantly made some predictions for the EIS market: no “new renewables” (yet), but that presents an opportunity for the managers, as many investors who had been introduced to EIS via renewables are now comfortable with the EIS concept and ready to diversify into other opportunities.
#6 Video highlights…
A short film and interviews with speakers and delegates are now available to view for those who couldn’t make it – and look out for information on our next masterclass on BPR on 28th April. To find out more about any of these topics, or our growing archive of research content, drop me a line at daniel@intelligent-partnership.com