'The most wonderful time of the year' for advisers

“It’s the most wonderful time of the year...”

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Andrew Aldridge | Deepbridge Capital
7th February 2020
Andrew Aldridge Deepbridge Capital
"We’re fully aware of how important deployment, and speed, is especially as we creep closer to the end of the tax year."

Don’t worry, I’m not referring to Christmas. It’s that time of year again when financial advisers and all in the financial world have their eyes fixed on tax-year end.

Of course, this year we also have the added ‘benefit’ of having a Budget announcement sandwiched in between now and the 5th April? In that sense, we know the rules we’re all playing by up until that point, but there’s every chance that the Chancellor could decide to make some wholesale ones on March 11th.

Given we have just ‘officially’ left the EU on the 31st January, there is every chance that this new Conservative Government is going to use the March Budget to introduce some significant new measures which may well change the landscape and environment for all of us – particularly IFAs.

We will have to wait and see on this, but what we do know is that the end of tax-year date does not change and those advisers/clients seeking tax-efficient investments during that period, have a limited period of time in order to make those investments and, rather crucially, to have those funds deployed.

And, while you will obviously be aware of the 5th April, investments will need to be made prior to this in order to get the outcome you and your client want. For instance, for both our Technology Growth and Life Sciences EIS products the closing date for subscriptions aiming to be deployed in 2019/20 is actually the 26th March. Only received and cleared funds, plus those that come with a fully-completed application form, will be able to be deployed, and this is only possible because we can deploy quickly on a monthly basis.

Consider the rest of the EIS market at your disposal; currently there are approximately 46 EIS funds in the market, with only three products expecting to fully deploy subscriptions on a monthly basis – two of those are the Deepbridge products I’ve mentioned above.

Therefore, when considering EIS investments it is critically important to understand where your clients’ money is being invested, and how quickly it will be deployed into the investee companies. We can deploy on a monthly basis because of our strong pipeline of investee companies, however other EIS investment managers will not be in the same position, and indeed, some deploy on a timescale far removed from this.

How many EIS propositions have £23m of capacity for immediate deployment and a further £25m of investee opportunities in advanced due diligence?

We’re fully aware of how important deployment, and speed, is especially as we creep closer to the end of the tax year. The ability to deploy quickly should be of reassurance to advisers, knowing that tax-planning can confidently be made based on this tax year (and the previous tax year utilising income tax carry back), plus advisers/investors get to know exactly what companies are in the EIS portfolios at the time of investment.

It’s obviously a major consideration as is a healthy comparison of investment managers and their EIS products before a decision/recommendation is made. Not all EIS’s are the same and therefore there is due diligence that needs to be done. For instance, if you are considering an EIS, ensure that the investment manager has a good track record of identifying quality investee opportunities, but that they’re also able to clarify when clients’ money will be fully deployed. If that track record of swift deployments is not there, then will you really know where investments will be going and, fundamentally, how do you know which tax year your tax planning applies to?

I am, of course, somewhat tongue in cheek suggesting that this is ‘the most wonderful time of the year’ for advisers, but for those reviewing their clients’ tax-efficient investments, it’s probably the most important time. Use that time wisely and understand fully the differences in the managers, their EIS products and how quickly they deploy funds – as this will ultimately dictate how you can advise clients.

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