When news broke that GrowthInvest had successfully agreed the takeover of Kuber Platforms, we took the opportunity to ask Daniel Rodwell, CEO, what this means for the sector, for advisers and clients and for the company itself.
AS: Good afternoon, readers. I’m delighted this afternoon to be joined by Daniel Rodwell, Chief Executive of GrowthInvest. Daniel, there has been some very exciting news for GrowthInvest that broke recently about your involvement with Kuber. I’m going to follow up on that in a minute as it was a very popular story with our readers. Before we do, can you give us a brief introduction and tell us a little bit more about GrowthInvest’s history and background to this.
DR: Very happy to do that Alex. GrowthInvest was launched in late 2016 and our focus was very much the adviser marketplace. We are a specialist adviser focused platform that provides a centralised digital execution and portfolio management solution for tax efficient investments. We are increasingly providing solutions in the wider private market space, due to requests from our adviser clients. When we first launched in 2016 we majored on the Enterprise Investment Scheme in a very similar way to Kuber, but the feedback we received from our clients was that they needed a broader solution, servicing the entire tax efficient investment market. Today, we provide a whole of market offering across Venture Capital Trusts, Enterprise Investment Schemes and Inheritance Tax Services or Business Relief products. We are also increasingly working with global private equity funds and venture capital funds to extend our offering, and very proud to have some of the largest, most sophisticated adviser firms in the country as clients. In terms of contracted assets under administration, we are around the £250 million mark, have a 12 month runway to achieve £500 million and a target thereafter of a billion.
AS: So what are some of the obstacles that advisers have faced in the past in terms of looking to invest in tax efficient investments for their clients?
DR: To set in a bit more context, at a high level we are to some extent just replicating what happened many years ago when main market platforms launched to provide advisers and their clients with the many digital efficiencies in accessing and managing portfolios of traditional assets. There are, and still remain, difficulties in the administration of investments across multiple product providers, both from an execution perspective and from a reporting perspective. We look to deliver the efficiencies that advisers have become accustomed to from main market platforms, but we specialise in the tax efficient and alternative side of the market. Tax efficient investments are complex structures, processes remain very paper heavy, and transparency and standardization of data remains an issue. Our goal was to deliver a platform solution that would work effectively for this marketplace, which we believe is becoming increasingly important to advisers and their higher value clients.
AS: You mentioned Kuber earlier and obviously some of our readers may be familiar with or have previously used that platform before for your acquisition of it. How does your business model differ from Kuber and what that model was?
DR: In advance of answering that, I should clarify the Kuber proposition for those that aren’t aware. Kuber was a technology platform that provided digital capabilities to make new investments in primarily EIS products, simplifying the process of diversification. They had a restricted, or curated offering, in terms of the products that were available. There are two fundamental differences between our business model and that of Kuber:
The first clear difference is that we provide whole of market access to invest in every product within the tax efficient investment universe, covering VCT, SEIS, EIS and IHT products. In terms of VCTs, this is an area within which we’re seeing huge growth. Our custodied VCT service, with it’s simple access to both the primary and secondary market is proving very popular with advisers and their clients. I do not think there’s a comparable whole of market VCT solution in the market at present.
Regarding EIS & SEIS products: we provide digital access to, and ongoing reporting on, any product within the EIS space, be they managed funds or direct investments. On the inheritance tax side, we’re the only platform through which you can buy and manage custodied AIM IHT portfolios alongside asset backed IHT solutions, all in one place. So that’s one core difference between ourselves and Kuber. It was very important to us to provide a whole of market product offering for tax efficient investments, and as I’ve mentioned, this continues to be extended into an increasing number of alternative and private market assets. In very simple terms, our service should solve efficiency problems for advisers, for any and all assets that are underserved by their main market platforms.
The second core area where we differ, is that Kuber didn’t provide capabilities to onboard historic client portfolios of tax efficient investments, whereas GrowthInvest does. This is an extremely important service in our view, and clients are getting an incomplete solution if they can only make new investments and report on those. We work with adviser firms that have multiple year legacy investment portfolios on behalf of their clients. In many cases, these are being managed using spreadsheets and filing cabinets. The result of this is that advisers lack the efficiencies and controls to deliver a good service to the client, and this restricts them from growing this area of their business. A prime example of this is in relation to VCTs. Many clients are currently holding paper shares certificates, that may or may not be out of date, and receiving dividend cheques through the post, which makes it very difficult for the adviser to keep track of these investments and their returns. At GrowthInvest, we work with the adviser firm to onboard these legacy holdings into our custody, ensuring that shares are then held centrally, in dematerialized form, and dividend payments flow back onto the platform. When onboarding the portfolios, we reconcile directly to the provider, ensuring we provide an accurate valuation and life to date performance. We then make this all available to the adviser and client via the platform, and provide all the efficiencies of digital execution going forward.
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