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The EIS Imperative – IFA Adviser Event Review

Another packed house yesterday for IFA Magazine’s latest Adviser Seminar, held at the London offices of JM Finn, who very generously hosted an event that focused on one of the fastest-growing areas of the UK investment scene. Namely, the exponential take-up of interest in Enterprise Investment Schemes and Venture Capital Trusts.

Just for once, the weather was on our side and the tube trains were running smoothly, and a great  morning’s conferencing and networking was had by all. A platform of no less than ten industry leaders, including Sarah Wadham, Director-General of the EIS Association and Annabel Brodie-Smith, Communications Director at the Association of Investment Companies, were on hand to take us through not just the whys and wherefores of EIS and VCT funding, but also the hows and whens – the tax implications, the risk factors, the timing aspects, and (not least) the task of getting hold of information on what is still a fairly fragmented investment scene.Annabel

Annabel Brodie-Smith, AIC Communications Director

Billion Pound Investment

EIS and VCT are both areas where the need for tax shelters among sophisticated investors has met with a growing general awareness of the need for start-up, seed and small business funding – thanks, not least, to the growth of crowdfunding and the popularity of TV programmes like Dragons’ Den.

It’s currently estimated that British EIS schemes have around £1 billion under management, with a further £3 billion in VCTs. EIS companies are small, by definition, and although some are on AIM the vast majority have no kind of listing at all. In theory, investors can access EIS investments directly, but the high risk levels and tight liquidity mean that EIS funds are a much safer and more diversified way to access the market.

A Lot to Learn

It’s also relatively unfamiliar territory for the majority of advisers, of course. That’s really got to change – not least because, as Andrew Marris, CEO of MI Capital Research reminded us, the FCA regards EIS companies as mainstream, and hence declares that they fall within the orbit of Whole of Market knowledge. (Is that scary, or what?). So, one way and another, we all had a lot to learn.


Broadcaster and media commentator Brian Tora opened the proceedings with an overview of the current global situation – not an easy call, actually, at a time when so much big-picture politics seems to be going on. But the microphone then passed to the indefatigable Sarah Wadham, Director-General of the EIS Association, who explained that the EISA is on a campaign to bring together providers, advisers and eligible EIS companies themselves within one arena. There’s a lot of information to be disseminated there, and there’s no time like the present to start.

Sarah is particularly keen to enlist advisers and managers into the EISA’s recently launched EIS Tolley Diploma, which offers professionals a unique chance to get to grips with the EIS and how it might help their clients. “We talk about the tax breaks and how you calculate them,” she says. “And we also talk about how you invest in the EIS. Do you go to a fund, do you go to individual companies, or do you have a managed portfolio? And what about the regulations?”

Sarah Wadham

Sarah Wadham, Director General of the EISA

Tony Müdd, Divisional Director for Development and Technical Consultancy at St James’s Place, then took the floor to outline some of the tax issues involved in helping clients through the HMRC maze. Many of us are familiar in principle with the rebates, the write-downs and carry-backs that investors can employ to mitigate their tax positions but there’s nothing like an illustrated lecture to get the details exactly clear in your head.

Andrew Banks, Senior Investment Manager at JM Finn, ran us through the use of EIS and AIM strategies to minimise tax liabilities through the Business Property Relief allowances – a theme which we’ve also covered recently in IFA Magazine.

But then it was time for Annabel Brodie-Smith, the AIC’s Communications Director, to take us back to basics with a broad-ranging review of how investment trusts operate, and how discounts, premiums and the unique capability for dividend smoothing can enhance investors’ returns. (VCTs are always investment trusts, of course.)

If we were feeling just a little daunted by the sheer variety and multiplicity of the EIS scene – and let’s face it, it’s a very broad church – Andrew Marris, CEO of MI Capital Research, was on hand with the announcement of a new online database project which aims to give advisers a set of comprehensive tools for identifying, assessing and portfolio building within this fast-moving sector. We’ll be featuring details of MICAP’s new proposition on the IFA Magazine website very shortly.

MW and MICAP

Editor Michael Wilson with MICAP’s Andrew Marris

Wisdom from the Managers

The next part of the seminar consisted of a series of presentations by leading EIS operators. Will Fraser-Allen, Deputy Managing Partner at Albion Ventures, opened the batting with an overview of Albion’s VCT and EIS funds. Shane Gallwey, Investment Manager at Guinness Asset Management, discussed AIM company funds and the scope for alternative energy investment within an EIS environment, and Talon Golding from Mercia gave us some fascinating insights into the potential for backing explicitly high-tech and leading-edge research, mainly with very small EIS companies.

Finally, Henny Dovland, Business Development Director at Time Investments, took us back into a discussion of the way the Business Property Relief and EIS areas intersect, with another visual exploration of the way that EIS and AIM investments allow CGT rollovers. All essential information.

Team Thinking

Quite a packed agenda then. But if we thought that was all we were going to be getting, we had another treat in store. As lunchtime got under way we were treated to an inspiring and very entertaining address by the legendary Gerald Davies, of British and Irish Lions rugby fame, who gave us some properly no-holds-barred thoughts about what to takes to make a national team stick together, and why we still have a few things to learn from the All-Blacks approach. It’s about single-mindedness, apparently. And a willingness to be modest, and to subsume your personality entirely to the team as an entity.

alex and Gerald Davies

 

Publications Director Alex Sullivan with rugby legend Gerald Davies


Plenty to think about as we headed out into the early afternoon scrum in the Tube. And an outstanding half-day’s learning. Our thanks once again to JM Finn for making it all possible, and we look forward to seeing you all again at our next IFA Magazine seminars.

 

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