2016 has certainly been a year we will all remember, given the significant events which have taken place.
The investment world of EIS, VCT and BPR is also going through a transformational period with a campaign led by Paul Wilson, chairman of IFA Magazine Publications. Through it, he aims to focus attention on the significant advantages that these asset classes bring to client portfolios as well as to the UK economy. The campaign is working to change the narrative around these schemes, which are losing their niche status and becoming established parts of client portfolios in their own right. With the year drawing to a close, Sue Whitbread has interviewed Paul to find out what’s been driving his passion for this ground-breaking initiative this year, and what he’s been doing about it to make things happen.
Q: Paul, can you tell us why you launched the campaign in the first place?
A: Yes, that’s easy. It was frustration mainly. I have been a serial entrepreneur myself and, have seen the positive impact that entrepreneurs have on society and their economic contribution through taxes and employment opportunities. It has therefore been difficult to reconcile this with the line that has so often been taken in the media that associates this vital investment sector with aggressive tax avoidance schemes which are not in any way connected to it. The narrative which has developed around tax breaks for the wealthy is destructive as well as being inaccurate. It needed concerted efforts to rebalance it and get the true picture out there. These are government backed investments, bridging the gap between wholly government and grant supported projects in Universities for example, and businesses that are sufficiently developed and robust that they can raise long term lending from the banks or unsupported equity investment. EIS is the bridge that allows commercial interests to take an idea from theory to reality.
Q: What are your aims and objectives for this campaign?
A: The campaign seeks to change the perception of EIS away from being a gamble and a tax avoidance measure for the wealthy, to an appreciation that these are professionally managed businesses guided by experienced managers, overseen by fund managers who are entirely focused on the healthy development and success of each investment. The investments stand on their own two feet as propositions. The tax element is not a tax break, but a risk sharing by the government to ensure that these businesses flourish and generate future tax revenue as well as jobs. Our aim is to get this message out to MPs, journalists and intermediaries to change the narrative and gain acceptance of EIS as a mainstream financial planning option.
Q: What are the outcomes or changes that you want to see happening as a result of your campaign?
A: We have had a very positive response with almost universal support from the industry and EISA in particular, who have been particularly supportive. The most encouraging aspect of the campaign has been the warm reception by the MPs and Civil Servants involved, of the case we have put forward and the feedback that this is a sector which needs to be supported, particularly in the post-Brexit world. We are hoping that more advisers and planners will feel comfortable recommending EIS to their clients as part of their portfolio. This is particularly the case as many clients are already self-investing via crowdfunding without the guidance of their advisers and may wonder where to turn for advice.
Q: What has been happening with the campaign throughout 2016?
A: At the start of this year we put together a working party with 12 representatives from EIS funds and the wider industry. The group has been charged with formulating a united strategy to co-ordinate clear communication about the values and philosophy underpinning the industry, support for entrepreneurs based on hard-headed business investment principles, and support to make sure those businesses survive, thrive and achieve the required exit opportunities. The success of this has led to a second working party group of a further 12 representatives who are charged with working on the task of communicating this message.
Q: What are the plans for 2017 and beyond?
A: Our contribution here at IFA Magazine is to relaunch the sister-publication EIS Magazine which is to be rebranded as GB Investments in 2017. It will provide an excellent resource for IFAs looking for information, news and guidance across the entire range of government-backed investments, VCT, BPR etc. and not just EIS and SEIS. We will also be looking at ways to co-operate with the education and qualification providers in the sector to see what can be done to help encourage advisers towards a greater understanding of this sector.
Q: Finally, why do you think that advisers should be interested in what is going on here?
A: EIS is now appearing as a mainstream product and is likely to be an area of greater positive focus for the government as the focus of economic development narrows on developing UK industry and jobs. This will increase awareness amongst the investing public. A second strand to this is the rise of crowdfunding. Many advisers are finding that clients are investing directly in crowdfunded investments. These don’t always benefit from the rigorous oversight an EIS fund manager brings and the risk element is effectively multiplied. As time goes on, clients will turn to their IFA for advice. The industry itself now boasts a number of platforms like Growthinvest and, Kuber which act as information portals and trading platforms. These make it easier for the IFA to provide considered, researched and robust advice to their clients. By not engaging with EIS, I believe that advisers may risk losing some clients to other advisers who are taking a broader approach. EIS has changed. It is no longer a tax exercise but an investment exercise with risk mitigation. Clients will be interested.