Determining an Evolutionary Moment for Tax Efficient Platforms

  • On February 15, 2018
  • By Ajency Admin

Investment in the VCT sector has traditionally lagged in terms of the technology and infrastructure available for investors. This is finally changing, says David Lovell, operations director at GrowthInvest

As the politicians make their various, mostly unfounded, claims on the best route forward for the UK post-Brexit economy, there are few on either side who contradict the suggestion that small UK businesses, the start-ups and the scale-ups, are likely to be at the heart of any future thriving UK economy.

The UK’s thrusting technology and IT sector is well-regarded across the globe, and the Autumn Budget has confirmed and enhanced the government’s support to growth businesses and investors through the EIS and VCT markets. The investment infrastructure for this sector is now also changing and there are several factors behind the emergence of tax efficient investment platforms.

Platform Giants

The current position for tax efficient investments has many parallels with the initial adoption and use of adviser platforms 15 or 20 years ago which, despite initial resistance from some advisers and fund managers, now sees over 90% of investment and pension flows through financial adviser marketplace. Most of this flows through one of the 15 or so specialist adviser platforms, many with subtle and slightly different market propositions. These trailblazers have ensured there is a clear and well-understood set of benefits for advisers and their clients to use platforms: including transparency, flexibility and investment choice. They also allow the adviser to lessen the administration and focus on their job. The client gets a cost effective and clear view of their portfolio. Nearly exactly the same service is now available in the tax efficient market.

The Patient Capital Review and the subsequent Autumn Budget have absolutely focused on growth investment. The tightening of the rules around qualifying companies, inevitably means there is a general move up the risk scale. While government shares in this risk through tax advantages, the only real way to manage risk is to ensure that there is proper diversification across a client’s portfolio. This should mean diversification across product providers, sectors, as well as the underlying investments. The best and easiest way to do this, while clearly demonstrating that a wide range of investment options have been considered, is on a platform.

There is a growing acceptance among product providers that allowing their clients to use the available technology to make investments in a manner in which they chose is perfectly reasonable.

The last 12 months has seen a change in attitude and there are a number of good initiatives at play. These include proper integrations with adviser’s back office and online systems, and proper online applications. Online document storage, portfolio valuations and access, an easy-to-use client portal, are becoming minimum standards and expectation. The HMRC continues to work closely with trade organisations and key industry players to bring processes into the 21st century and away from a reliance on the Royal Mail.

Mainstream Investing

A recent adviser survey that GrowthInvest conducted on behalf of EISA showed that over 52% of advisers thought they were likely to do more EIS and tax efficient investments than in previous years. The HMRC is already seeing an increase in revenue from savers who have exceeded their lifetime allowances and a sensibly managed tax efficient portfolio, with clearly managed risk should become a much more commonly seen retirement solution.

A client solution this powerful needs to be properly managed on a platform that allows the adviser to focus on the advice and the investments. The technology is clearly available, and the time is right.

This article features in the latest tax efficient supplement, Lighting the Way Ahead, available by clicking here.

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