A recent survey and adviser roundtable discussion, carried out by Intelligent Partnership, have found that a majority of advisers DO recommend investments on AIM and 11% of advisers surveyed use AIM investments frequently. Of those frequent users, 73% see their use of AIM to increase over the next two years.

The Alternative Investment Market (AIM) was launched in 1995 as a sub-market under the London Stock Exchange, and so far it has raised more than £96 billion equity capital for 3,654 smaller companies. As AIM is not regarded as a ‘recognised’ market by HMRC, a significant proportion of AIM shares have the added benefit of qualifying for the UK’s tax advantaged venture capital schemes and 100% relief from IHT.

When asked what are your three top reasons for recommending AIM based investments, the most common response is growth (46% of advisers). Diversification and Risk Management places second and indicates that some IFAs see AIM as a way of providing diversification within the context of an entire portfolio. Many advisers also invest on AIM for IHT planning purposes. The synergy between the top three responses to this question makes sense: advisers can diversify a portfolio and start planning for IHT without having to sacrifice growth by investing in the right stocks on AIM.

In terms of selection criteria, performance history is the top consideration of advisers, followed by provider reputation and transparency. Given the volatility of AIM, this is expected as there is bound to be a strong desire to see evidence of the sort of stock picking skills that are required to avoid the damaging fluctuations of the overall index.

Ian Shipway at HC Wealth Management shared his experience on recommending AIM: “Clients are actually quite keen on it, because a lot is made of IHT planning and if you ask anybody if they want to save IHT, then of course they will say yes. However, the difficulty with almost all of the more conventional approaches is that you’re essentially giving up access and the use of your money and in an uncertain world, particularly with the uncertainty of possible long-term care, the clients are very happy to consider alternative options”.

However, client age plays an important role when it comes to AIM investing. Ian Smyth, Johnston Campbell Ltd, commented: “There is a bit of a conflict when it comes to attitude to risk and understanding, especially for older clients, maybe in their 70s and 80s. The perception is that AIM is higher risk, and so even though an IHT portfolio might be the best solution for the client, and overcomes the risk of doing nothing and paying 40% IHT, there could be a bit of a conflict of interest there with the client’s attitude to risk and how you substantiate that with the FCA”.