Happy Christmas (is the war over?) | IFAM94/GBI23 | December/January 2021 by Clifton Media Lab

For todayâ&#x20AC;&#x2122;s discerning financial and investment professional

A special combined issue with

M AGAZINE

Happy Christmas (is the war over?) A Financial history of Covid-19

Redesign to reignite Michelle Hoskin, Standards International December/Januar y 2021

ANALYSIS

REVIEWS

In the spotlight Blackfinch Ventures

IFAM94/GBI23

COMMENT

INSIGHT

e a r ly b i r d

o f f e r

Praetura EIS Growth Fund

Early Bird Offer 0% initial charge on all advised Applications received by 31st January 2021. Next soft close 31st March 2021. Capital at risk.

c o ntact jon.prescott@praetura.co.uk praeturaventures.com

CONTE NTS

CONTRIBUTORS

Dec/Jan 2021

Welcome

What might 2021 have in store for EIS and SEIS?

Faith Liversedge

EISA’s Mark Brownridge gives us his thoughts on the year ahead

Thinking differently about Seed EIS. Alistair Marsden, Nova Growth Capital, highlights the attractions of this asset class

Paul Wilson Chairman, Clifton Media Lab paul.wilson@cliftonmedialab.com

The Par Equity investment approach IFA Magazine talks to Par Equity's Andrew Noble about how their approach is driving success

12 Peter Wilson Online Writer, IFA Magazine peter.wilson@ifamagazine.com

The case for year-round EIS investing Vala Capital’s Debbie Mahanta highlights why avoiding the tax-year end rush is a sensible investment strategy

Making a positive different at the cutting edge Matthew O'Kane, Nexus Investments, outlines why he believes the attractions of EIS are more pertinent than ever before

17 Sue Whitbread Editor sue.whitbread@ ifamagazine.com

Are you ready to meet client demands around ESG? Richard Cook, Blackfinch Group

A financial history of Covid-19 In part three of his series, Paul Wilson asks whether Chancellor Sunak is finally out of ammo?

Alex Sullivan Publishing Director alex.sullivan @ ifamagazine.com

Kim Wonnacott Technical Sales and Marketing kim.wonnacott@ifamagazine.com

In the spotlight IFA Magazine talks to Dr. Reuben Wilcock,Blackfinch Ventures, about EIS, ESG, 2020 and the outlook for 2021

Octopus Investments Jessica Franks, Head of Tax, shares her thinking on clients who can benefit from BPR

Redesign to reignite Michelle Hoskin, Standards International, delivers practical strategic planning tips for financial planners for 2021

Diversification needs to become truly diverse 7IM’s Matthew Yeates highlights a new approach to an old problem

How to generate referrals practical tips from Faith Liversedge on how to improve your client acquisition strategy

Supporting effective MPS due diligence The final article in our series looking at the MPS research process based around analysis from Tony Catt

Designed by: Becky Oliver IFA Magazine is published by IFA Magazine Publications Ltd, Tel: +44 (0) 1173 258328 3 Worcester Terrace, Clifton, Bristol BS8 3JW © 2020. All rights reserved ‘IFA Magazine’ is a trademark of IFA Magazine Publications Limited. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies. Wherever appropriate, independent research and where necessary legal advice should be sought before acting on any information contained in this publication. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. IFA Magazine is for professional advisers only. Full details and eligibility at: www.ifamagazine.com

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The legal lens Zulon Begum and Nicholas Hawkins of specialist employment and partnership lawyer CM Murray LLP, highlight key issues to consider when converting to LLP

Open Offers Our listing of what’s currently available for subscription

Career Opportunities From Heat Recruitment

Dec/Jan 2021

WE LCOM E

HAPPY CHRISTMAS (IS THE WAR OVER?)

erhaps the best Christmas cracker of a gift that any of us could have hoped for in this most difficult of years was the wonderful news that clever scientists around the world have developed an effective Covid-19 vaccine. It looks like a case of a bleak mid-winter for now and the war against Covid-19 isn’t yet over but at least we have hope. That’s why for this edition of our magazine, we decided on a nice, bright cheerful image for our front cover which we hope will lift your Christmas spirits just a tiny bit. Of course, there are still plenty of unknowns as to when and how the resulting vaccination programme might happen once regulatory approval is – hopefully – granted. There are big challenges still to be faced around the logistics of getting the world’s population vaccinated. THE ROAD IS SO LONG How the world and the world of financial advice and investment will respond and react in 2021 is a big unanswered question. The greater use of technology has been nothing short of spectacular but will the new working practices which we have collectively embedded this year help to drive change in a positive way? The way that people and businesses have adapted to the need for working from home, how we’ve used web-based platforms for team meetings, client contact and even conferences has been transformational. Of course, there are other areas of our working practice which are harder to adapt online. I, for one, really miss the connection with friends, family, colleagues and the financial planning community at large. All this isolation takes its toll but when we are able to meet up safely again, face to face, the chances are we will value it all the more.

In this edition of IFA and GBI Magazine, we hope that you will find plenty practical information and ideas that we hope will provide you with, not only a good read over the Christmas period, but also some sound take-aways that you can use within your advice business in 2021 and beyond. FOR WEAK AND FOR STRONG As we approach Christmas and 2021, we cannot help but reflect back on what has been such a difficult year for all of us as a result of Covid-19. It’s been incredibly tough for so many facing health problems, the loss of loved ones, restrictions on our lives and economic pressures which have been – and still are – considerable. These will continue to impact for many years to come as the global economy tries to come to terms with the consequences. And I’ve tried not to mention the “B” word, but with no immediate sign of a Brexit deal with our EU partners, we can only hope that the situation will be resolved soon. On behalf of the whole team here in Bristol, we wish all our IFA and GBI Magazine readers, contributors and supporters a relaxed and peaceful festive period as well as a happier, healthy and successful New Year. As John Lennon so beautifully put it “let’s hope it’s a good one, without any fear.” We’re with you on that one John – wherever you are. Best wishes, Sue Whitbread Editor IFA Magazine

I FAmagazine.com

From 1 January 2021

The way you hire from the EU is changing

Free movement is ending, and the new points-based immigration system will introduce job, salary and language requirements that will change the way you hire from the EU.

You will need to be a licensed sponsor to hire eligible employees from outside the UK. Becoming a sponsor normally takes 8 weeks and fees apply. This will not apply when hiring Irish citizens or those eligible for status under the EU Settlement Scheme.

Find out more at GOV.UK/HiringFromTheEU

E ISA

Dec/Jan 2021

WHAT MIGHT 2021 HAVE IN STORE

FOR EIS AND SEIS Mark Brownridge, Director General at EISA, reflects on 2020 and explains why he remains optimistic that 2021 will be a good year for tax-efficient investing

s coronavirus continues to dominate almost every aspect of our lives, the stark realisation of the economic impact of the coronavirus epidemic is being laid out vividly before us.

At the time of writing, the number of people claiming benefit in the UK has risen by 23%, GDP is down 20%, and UK public debt is now larger than the size of the UK economy. All hopes of a V shaped recovery seem to have dissipated and we still face huge uncertainty. Oh, and you can throw in the still unresolved Brexit situation just for good measure. Two words sum things up. Doom and Gloom. For startups and scaleups, the funding situation is dire. Positively, there is much appreciation of the role the UK’s start-ups and scale-ups can play in reigniting growth in the UK amongst Government and Westminster and perhaps this will spark a renewed and sustained interest in supporting the UK’s SMEs. We believe that there is momentum behind the EIS and SEIS cause and expect to see a number of measures aimed at growth capital introduced either early in 2021 or at the Budget in March.

WHERE ARE WE NOW? But let’s rewind and consider where the EIS and SEIS industry currently stands. Firstly, the usual end of tax year fundraising season in 2019/20 took a massive hit from the first lockdown. This is normally the biggest fundraising time of the year for EIS and SEIS investments. As a result, for Covid19 to hit then, had a devastating effect on fundraising with investors seemingly taking risk off the table and not being prepared to invest at such an uncertain time. EIS and SEIS fund managers report that their fundraising fell by as much as 60-80% of what they were expecting. The domino effect of this has unfortunately fallen on the start-up and scale-up businesses that fund managers had identified for investment, with many being left with either severely cut allocations or none at all. As we begin to focus in on the 20/21 tax year end, we are starting to see an uptick in interest from planners and advisers and it seems as if clients are coming back to the risk table and taking tentative investment steps. This is to be welcomed. After all, one of the side effects of Covid19 is that it has created plenty of demand for equity funding from companies as well as lower valuation points so there are a number of exciting companies available for investment at great value.

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E ISA

Dec/Jan 2021

OPPORTUNITY KNOCKS

IS NOW A GOOD TIME TO INVEST?

Many of these companies have been the first responders to the pandemic. With the guidance and support of their fund managers, entrepreneurs and innovators have transformed and pivoted their businesses to help. Beermakers and distilleries have shifted production to hand sanitizers. 3D printers have been used to create the valves used in ventilators. Those just-in-time valves are saving lives.

For those thinking of investing, now is a great time. Many of these companies still require investment and investors have the chance to acquire an equity stake at an early stage of their development which could stand them in good stead in future. As always though, diversification is the key.

What these innovations have in common is that they solve problems, which is always at the heart of innovation. But there is much more to the generative nature of a crisis that leads to innovation than simply an opportunity to solve problems. Crises present these companies with unique conditions that allow innovators to think and move more freely to create rapid, impactful change. Early stage businesses are able to do this much better than older, more established businesses. They can take advantage of their smaller size, be more nimble and act quicker than blue chip businesses for whom change is anathema and who move at the pace of an oil tanker. When we look back on the current health pandemic, there’s no doubt that we’ll learn that it resulted in a number of innovations: new drugs and medical devices, improved healthcare processes and manufacturing and tech breakthroughs. This is why EIS and SEIS investment is so important in providing smart, seed capital for these innovations. Fund managers play an important role in developing the CEOs and innovators in these businesses, many of whom have a great idea, product or concept but no experience or inkling as to how to market or commercialise these. We are already starting to see the fruits of this process. Normally an EIS or SEIS portfolio plays out over the course of 5 or 7 years and it’s only at this time, we find out who the winners and losers are. Covid19 has significantly accelerated this process and diluted it to around 6-9 months. In many portfolios, it’s already clear who the winners and losers are. Take for example, one portfolio. 12 investments overall, one is a home delivery baking kit specialising in baking with children. With everyone locked up at home for 3 months and baking became very en vogue, sales have sky rocketed and the company has scaled up quickly. At the other end of the spectrum, a travel company specialising in holidays for the over 60s faces a very tough time but is still managing to operate thanks to support from its VC. Two companies with very different future prospects and their fate largely determined within 6 months.

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So, there is much to be hopeful for in the EIS and SEIS world. After the financial crisis of 2008, many now successful companies started in reaction to being displaced by the crisis, innovated and flourished. Famous names include WhatsApp, Groupon and Uber. Those opportunities exist now so do your research and go and find them! Finally, our role at EISA is to ensure the schemes are functioning as they should and are supporting both investors and businesses, particularly at times like these. In our conversations with Government, we are confident EIS and SEIS has been earmarked to play a part in the next round of growth funding. It was heartening to hear the Economic Secretary, John Glen MP, say on a webinar recently that he was aware EIS hadn’t been able to be included as part of the Future Fund and this was “a gap he hoped to fill”. I’ve also been told the Chancellor has seen EISA’s representations and is said to be sympathetic of expanding the schemes. If this is true, watch this space next year!

About Mark Brownridge Mark has over twenty years’ experience in financial services and prior to becoming Director General of the EIS Association, he was Head of Research and Development at Mazars, a leading UK financial planning firm. Mark is highly qualified being a Certified Financial Planner, Chartered Financial Planner, Chartered Wealth Manager and Fellow of the Personal Finance Society and also sits on the Chartered Institute of Securities and Investments Accredited firms committee and TISA’s Distribution Policy Council. Mark’s involvement with EIS began 8 years ago and he has since championed EIS investing within a financial planning context and is extremely passionate about promoting the industry, increasing its effectiveness and ensuring the private sector continues to drive much needed funding to small companies.

NOVA

Dec/Jan 2021

THINK DIFFERENTLY ABOUT

SEED EIS It is a great pity that most advisers have dismissed Seed EIS out of hand because they see it as an investment that is just too risky for most clients. It is a pity for three very powerful reasons, and it really is time to think again about Seed EIS.

THE VALUE OF START-UP BUSINESSES First of all, in the current economic climate, more and more people are looking to set up their own business. Many have great ideas that are seeking to take advantage of technological change, and the ‘new normal’. It is new businesses that will underpin our economic recovery and growth in the years to come. It is start-up companies that will provide jobs, pay taxes, and benefit communities. But many need a helping hand to lift them off the runway. THE MOST GENEROUS TAX RELIEFS Secondly, Seed EIS offers the most generous tax reliefs available from the government today, although tax reliefs are subject to personal circumstances. It offers 50% Income Tax Relief, as well as Capital Gains Tax and Inheritance Tax benefits. But the tax benefit that is often overlooked is that of Loss Relief. Loss relief can be claimed at half your marginal rate of tax, should the company fail. For a 45% tax payer, this is

a further 22.5% of tax relief, so that effectively 72.5% is underwritten from the outset, meaning that the amount at risk is just 27.5% of your investment. For example, if you make a £10,000 investment and the startup fails (your investment is no longer worth anything) you could claim loss relief. Firstly you could claim the 50% income tax relief (£5,000 in this example). Then of the remaining £5,000 you can claim 45% income tax relief on this £5,000 loss, so your total loss is only £2,750. This means that it doesn’t take many successful companies in a SEIS portfolio to make it a profitable investment. Of course the tax relief is there to compensate for the risks involved, but the potential for genuine growth is also high. THE CRITICAL DIFFERENCE At Nova Group we started investing in start-up companies in 2008, which was four years before the government introduced Seed EIS, to build on the success of EIS. What this means is that we have learnt a great deal about which companies and founders are most likely to succeed, and what support is needed to give them the maximum chance of success.

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NOVA

What we appreciated at the outset was that it is very early on in a companyâ&#x20AC;&#x2122;s life that they need a lot of expert help, at the very time that they are unable to afford it themselves. We also learnt that the needs of different companies are not the same, and so flexibility of resources is the key. In response to this need we put together an expert pool of support resources. These include software and hardware engineers, computer programmers, brand specialists, marketeers, finance specialists, project developers and project managers, and much more. We developed a flexible approach so that we could draw on these specialist skills, as and when they are needed. Then, over time, as the company generates revenues and starts to become profitable, we help them to become independent, and start to recruit their own staff, at the time that they can afford it. It creates a natural transition to profitable growth. The other difference that we appreciated early on is that with the best will in the world, and the most stringent selection criteria, some companies will fail. After all, circumstances change. We only have to look at the unexpected arrival and impact of Covid-19 to understand this, although in the instance of Covid-19, it has also opened up many opportunities for entrepreneurs. That is why we offer a very diversified portfolios of companies that we invest in. This means that we will aim to invest in at least 20 companies every year knowing that sadly some will inevitably fail. As SEIS invests in very small companies, this risk is greater than with other investments. Small companies are more volatile and more likely to fail than their larger counterparts. But what we do know is that our success rate of growing profitable companies is above the average. By investing early in a company, investors catch more of the upside in their value than later investors do. This makes Seed EIS, done our way, a very exciting place to be for investors. THE PRACTICAL USE OF SEED EIS Given the levels of tax benefits, Seed EIS has to be an important tool in financial and tax planning subject to personal circumstances. But more than that it adds an important new ingredient in portfolio diversification. It is in a market that offers prospects

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Dec/Jan 2021

of real growth, when few other markets today offer this potential. We think it is time to look differently at Seed EIS. Capital is at risk â&#x20AC;&#x201C; the value of an investment may go down as well as up. Past performance is not an indicator of future performance. Investing in start-ups and earlystage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution. It should be done only as part of a diversified portfolio. These investments are targeted exclusively at investors who understand the risks of investing in early-stage businesses and can make their own investment decisions. Any pitches for investment are not offers to the public. The tax treatment of these investments depends on the individual circumstances of each investor and may be subject to change. In addition, the availability of any tax reliefs depends on the investee companies maintaining their qualifying status. Investments made in investee companies via alternative investment funds are not covered by the Financial Services Compensation Scheme (FSCS). For more details, please contact us or refer to their website: https://www.fscs.org.uk Nova Growth Capital Limited is an Appointed Representative of Sapphire Capital Partners LLP, which is authorised and regulated by the Financial Conduct Authority (FRN 565716).

About Alistair Marsden, Chief Marketing Officer, Nova Growth Capital Alistair is both a founder and C-level sales and marketing professional with over 15 years senior leadership and board experience of starting and growing industry leading sales brands. He is responsible for oversight of the Nova Group's commercial efforts as well as delivering the Fund Acquisition strategy. Company regulation: Nova Growth Capital Limited is registered as a private limited company in England and Wales, registered number 11591402. Nova Growth Capital Limited is an Appointed Representative of Sapphire Capital Partners LLP, a firm authorised and regulated by the Financial Conduct Authority (FRN 565716)

Dec/Jan 2021

PAR EQU ITY

PAR EQUITY IS THE

BRIGHT EIS STAR OF THE NORTH

IFA Magazine's Peter Wilson talks to Andrew Noble, Partner at Par Equity, about why their investment thesis is driving success for investors

ar Equity is a leading EIS technology investor focused on the North of the UK, but with a unique business model. It brings together its EIS Fund’s invested money with additional funding from its network of business angels. Par Equity harnesses the expertise, industry knowledge and network of contacts of these business angels to turbo-charge its investments. IFA Magazine spoke to Par Equity Partner Andrew Noble, hot on the heels of their most recent exit, Symphonic Software, which delivered a blended return of 8.3x money to EIS Fund investors across two rounds. Noble started with a quick review of Par Equity’s year. ‘In February, as the pandemic unfolded, there was naturally some uncertainty. But by April it was clear that we were well placed. With a large position in enterprise tech, health tech, and industrial tech, there was, ‘a nimbleness across our portfolio to adapt and take advantage of new opportunities, our outlook was very positive.’ The global pandemic accelerated the digitisation journey for most large enterprises. Noble explained the impact this

had on Par Equity, ‘across most of our portfolio we’re seeing accelerated sales cycles, and increased acquisition interest.’ In the quarter to end of September, the average revenues for the companies in the Par EIS Fund increased by 77%. In the same period Par Equity received 8 unsolicited acquisition requests, with 3 more by the middle of October. Symphonic Software itself was sold to a US listed acquirer within a rapid 37 day period, from Letter of Intent to exit on 31 October, Halloween. At 8.3x money it was certainly a treat for investors. One of the attractions of Par Equity is the breadth of fire power it can provide its portfolio companies. Noble explained, ’Our EIS Fund drives our investment activity, but we also have three further sources of capital to support our companies as they grow.’ As well as the EIS Fund, Par Equity also have a network of professional investors, who invest alongside the fund, on identical terms. Then there is the Scottish Investment Bank, with whom Par Equity is a tier 1 co-investment partner, and then earlier this year, Par Equity became a partner of British Business Investments, for its Regional Angel Programme, focusing

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PAR EQU ITY

Dec/Jan 2021

on investments in Scotland, Northern Ireland and the North of England.’

investors and a 27% IRR, before any EIS relief. The average holding period of exits is 4.5 years.

However, Noble credits Par Equity’s success to its underlying investment thesis, ‘There is far more to technology investing than the money. Young companies need the right advice and support at every level. That is where our investor network is so vitally important.’

The network has worked so well that Par Equity recently launched new initiatives to widen and deepen their pool of available talent even further. Noble commented on this, saying,’ We’ve established an executive search panel with head hunters around the UK, to help us identify further talent for screening and supporting our investments. We’ve launched regional chairs to deepen our presence in cities across the North of the UK, with recent appointments including Hugh Little in Aberdeen and Ronnie Geddis in Belfast. Finally, we’re deepening our ties with some of the best universities in the North to identify emerging talent and to generally increase the exchange of knowledge. Edinburgh University and the University of Strathclyde are two early partners. Early traction across all 3 initiatives has been very positive. We are very excited about this.’

Par Equity’s investor network comprises of 200 business angels, many of whom want to get involved and help out. Par Equity tries to maximise this interest and expertise as early in the investment cycle as possible. Noble explained, ‘Our best deal flow often comes through this network and we then pull in those with the right expertise to provide supplementary due diligence on these opportunities.’ Noble continued, ‘When we invest, we may invite those with the right industry expertise to act as adviser, or a Board Member to the company, recognising that we need to refresh this position every so often, adding the right people at the right time.’ Par Equity currently has 27 members of the network playing a role on the boards of their portfolio companies. In effect, they are an extension of Par Equity acting as operating partners. Noble concluded, ‘All this means that we offer considerable added value to our portfolio companies.’ By using their network in this way, Par Equity can ‘turbo charge’ their investments, and this is demonstrated in the level of returns they are generating for their investors. Par Equity has now backed 61 companies since 2008, covering 241 EIS qualifying investment rounds, and following the successful sale of Symphonic last month, they have now realised 21 companies. On a blended basis these have registered 3.8x money to

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When asked about his views on EIS generally, Noble responded ‘I think EIS is vital to the early stage investment market, and in turn, innovative technology companies, which are suitably resourced, are vital to the future of the UK economy, whilst also addressing the UK productivity gap. A huge number of EIS backed companies are transforming industries. Whilst some jobs are being displaced, many more are being created in highly productive roles. EIS itself is now over 25 years old, and clearly has the support of the government. Young companies recognise its value, so it is down to the likes of Par Equity to keep supporting these great companies and to continue to deliver good returns for investors.

Dec/Jan 2021

VALA CAPITAL

THE CASE FOR

YEAR-ROUND EIS INVESTING

Vala Capital’s Debbie Mahanta highlights the reasons why leaving your clients’ EIS investments to the last moments of the tax year is in nobody’s best interests

or years now the EIS investment market has been heavily cyclical. Many EIS providers raise a large proportion of their annual funds in the first quarter, often concentrated into the last four or five weeks of the tax year, when all things tax-related are at the top of the client agenda. Until recently, the urgency was also driven by a large number of EIS investment opportunities that could promise clients who subscribed in February or March that their EIS shares would be purchased before 5th April. This approach makes it possible to use the tax reliefs to claw back some of the tax bill paid in January. THE NEW REALITY The 2018 introduction to the EIS rules of the ‘risk-tocapital’ condition changed the market considerably, but investor habits have not necessarily caught up to the new reality. The rules have put a stop to many ‘asset-backed’ EISs, such as those investing into renewable energy. Because those products were more like project finance than venture capital investing, the managers could easily deploy client funds to a tight deadline at the tax year-end. The absence of these products from the market means that investors who want to write a cheque after 31st January for investment into shares by 5th April are now left with fewer credible choices. Furthermore, the EIS managers who can meet this urgent demand might have limited capacity to fill, creating a risk that a client misses out completely.

As such, there is a good argument for encouraging clients to take the stress out of EIS investing, by thinking about it earlier in the year. With clients who like to make ISA and pension contributions at the start of a new tax year, there is a natural opportunity to bring EIS investments into the planning conversation. Most EIS portfolio products will deploy a client’s subscription into EIS-qualifying shares over a period of around one year. If a client invests in an EIS portfolio service in April or May, there is a good chance that most or all of their share purchases will take place before the next tax year-end rolls around. As such, they could achieve the same investment objectives as a client who looks for a quick fix at the end of the tax-year, but with the added benefits of being able to choose from moreor-less every EIS product on the market. They will avoid the risk of missing out on their preferred product due to limited capacity. And they will have the luxury of choosing an EIS based on other preferences, such as their interests in particular industry sectors or investment themes. Some EIS portfolio products (including the Vala EIS Portfolio) invest in tranches, so that an investor’s subscription will be deployed into a diversified portfolio of companies on fixed dates throughout the year. This can be helpful for clients who start thinking about EIS in the summer or autumn, particularly if they would like certainty about the timing of investment into shares, for tax planning reasons. Investing in tranches avoids the complexity of a subscription being invested across more than one tax year. And if a client invests in a tranche that

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VALA CAPITAL

closes by late summer, or even early autumn, they could receive all of their EIS3 certificates in time to claim reliefs when they complete their tax return in January.

Holding off making EIS subscriptions until the first quarter of 2021 may only serve to reduce a client’s investment choices and increase the risk on missing out altogether due to limited capacity

THE COVID-19 EFFECT This tax year, it will be interesting to see what impact the Covid-19 pandemic has on the usual EIS market cycle. Uncertainty tends to create a ‘flight to safety’ among investors. It seems likely that many clients will be sitting on cash and holding off making their EIS investment decisions until we have more clarity. Of course, whilst this might be a natural investor instinct, it is not particularly rational. EIS managers are constantly refining their strategies and their investment choices based on the prevailing market conditions. Proficient EIS managers will not be investing into

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Dec/Jan 2021

companies that are either already struggling because of the pandemic, or that are expected to run into difficulties as soon as the full economic impact hits home. In reality, holding off making EIS subscriptions until the first quarter of 2021 may only serve to reduce a client’s investment choices and increase the risk on missing out altogether due to limited capacity. However, old habits die hard. And though there is a reasonable argument that EIS should be for the whole year round, clients and their advisers know the value of a deadline and the 5th April is a pretty good one!

About Debbie Mahanta Debbie joined the Vala Business Development team in November 2020 with over 20 years' Financial Services experience. She is qualified as a financial planner (DipPFS) in the UK and also has cross border planning experience from her time in Switzerland before moving into sales management and strategic business development roles for UBS, St. James's Place Wealth Management, Guinness Asset Management and Tilney Financial Planning. Debbie has a wealth of experience in tax efficient investments with a focus on EIS and her role is to create and develop relationships with professional advisers and intermediaries across the UK. She sits on the EIS Association Membership & Events committee as well as serving on the STEP City of London Committee for over 8 years.

N EXUS

Dec/Jan 2021

MAKING A

POSITIVE DIFFERENCE AT THE CUTTING EDGE

Matthew O’Kane, Managing Director at Nexus Investments shares his personal insight into why cutting edge companies in the Ed Tech, Data, and Health Tech Sectors, supported by EIS, can be such a powerful driver of success, not just for client portfolios but also for businesses, the economy and society at large

first came across the concept of the Enterprise Investment Scheme (EIS), back in 2002, whilst I was studying for my ACA exams with PwC. Now almost 20 years later, now a Fellow of the Institute of Chartered Accountants (FCA) and as Managing Director of the award-nominated Nexus Investments’ Scale-Up Fund, I find that its attractions are more pertinent than ever before. The purpose of this short case study (number one of two) is to give you an insight into how some of our firm’s EIS portfolio holdings going back to 2013, have been nurtured and achieved real success for investors “on the way out”. BACKGROUND TO EIS In simple terms, EIS, and specifically an EIS Fund such as ours, facilitates the ability for private, individual investors who are UK tax resident to be able to support a diversified and actively managed group of burgeoning private

companies. These are often ones which are making or attracting positive notices within their sector, for those who know how and where to read the signals, and to spot them; are often cutting edge and still founder-led; and are still “under-the-radar” of the mainstream later-stage “institutional” UK investment scene. Earlier investors know they can potentially access the outstanding later rewards achievable for groups of early shareholders in such companies; but with EIS, can better balance the risks versus rewards of what ultimately is an illiquid and longterm investment class for most people, via a number of “protections” inherent in EIS qualifying companies, as long as they are held for 3 years. STEPS TO SUCCESS In our view, and our experience this requires a focus on diversification – not too little, and not too much - but also to engage with a knowledgeable, sector-specialist EIS investment manager. One involved at the cutting edge of VC

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N EXUS

investing, rather than one focussed only on tax-advantages. Ideally, this would be one which also puts “skin-in-the-game” and invests into deals alongside your clients. THE FOUR QUADRANTS APPROACH Nexus only invests into businesses that fall across one or more of four “quadrants” which we first identified back in 2014 as “themes and essentials of the future”. Specifically these are Data, Digital, Ed Tech &/or Healthcare. Our selections are always mission-driven and still with at least one original founder in situ. Invariably they are founded by somebody who was aged 36-45 when they decided to create or follow their vision, often with exceptional academics and or prior entrepreneurial track record, and some fundamental spark that can translate into a global presence for their firm one day (further to some fascinating analysis we have done in-house comparing our 25 or so portfolio to date). If I was acting in an advice capacity, I would, if possible, be matching my client’s own life interests - or those of their family members, particularly younger ones - with the focus and ethos of an EIS Fund Manager itself. Topics like sustainability, remote learning, distance working and digital healthcare matter to many of the Nexus Group’s c. 100 staff, and matter to the next generations particularly.

Dec/Jan 2021

SCALING UP After three seed rounds, supported by around £1 million worth of predominantly EIS investment capital – and with Nexus a key and core member representing investor shareholders on the Board at this nascent time – by 2016 this young UK business was able to secure material contracts to supply some of the largest global education publishers in the world with their future digital video asset needs. Amongst those who spotted the potential, outside of EIS investors, were noteworthy strategic and very large USbased industry participants – including one of the largest distributors of textbooks in North America. The business subsequently went on to receive series A investment in both 2017 and 2019, including further EIS and VCT funding totalling a further £8m. By late 2019 the business was now turning over £ multiple millions, and servicing the video assets needs of digital curriculums in some of the largest states in the Middle East, USA and Asia. Around this time, a second noteworthy strategic investor expressed interest to join the business as a shareholder: this time, one of the world's foremost white board manufacturers, with global presence, particularly in North America and Asia. To facilitate this, early investors were invited in chronological order to consider participation in a partial sale of some of their earliest shares. EXCITING – AND EXITING

LIFTING THE LID In early 2014, we led the early SEIS and EIS investment rounds into a Video Library Ed Tech firm called Knowledgemotion. It had been set up by two well-respected media industry folk, in particular one of whom had been involved in the launch way-back-when of the BBC iPlayer. It quickly became apparent that this was a fascinating business which over time came to be led by one particularly impressive individual, who, because his son, being dyslexic, had benefitted from the use of video in the classroom, had as a result a clear vision for how education could be transformed in the classrooms of the world in years to come. This would happen through a better and nimbler appreciation and usage of pre-existing video and television footage, married to algorithmic driven tech, to bring lessons and learning to life.

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As part of that transaction, those shareholders who elected to dispose of part (but not all) of those shares, were able to realise a return on original investment in the region of 4.7x. With the benefit of the original EIS or in some cases SEIS treatment of their investment bracket, they were able to achieve a post-tax return of as much as 9.4x. Over 6 years this equated to an IRR of c 30% or more. They have all however retained an ongoing interest in a business which continues to grow and win contracts throughout the world. Whilst EIS is often as much about protecting the downside from the likelihood of losers, as it is of riding the winners “tax-free”, the message is that the latter possibility should not be disregarded entirely when contemplating a client’s portfolio. And this is more likely achieved with entrusting client’s money to specialist

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and expert industry fund managers, who really know their space.

IN CONCLUSION I hope that the above has been useful in showing what a laser-focussed, value-added EIS adviser and fund manager can achieve for investors “on the way out”. Next month I will look at highlighting “the way in”. For more information on Nexus Investments Scale-Up Fund and our monthly subscription schedules, visit www.scaleupfund.co.uk. Our next completion will be 18th December 2020 to join our current pipeline of deals. For more information on Nexus’s 26-year group history, and to see more of the Ed Tech, Data & Healthcare companies we have backed to date to globally scale-up, visit www.nivl.co.uk

DIVERSIFICATION, NOT ISOLATION

About Matthew O’Kane, Managing director, Nexus Investments.

The above is not an isolated experience: in 2018 and 2019, we also facilitated positive returns on exits or partial exits from two cutting edge Healthcare holdings, one called Pharmacy2U, another called Medopad (now Huma). Both achieved 5x for some of our investors irrespective of tax, both continue to go from strength to strength for those who held.

Matt is a tax specialist, Chartered Accountant FCA BPA (ICAEW). and a Chartered Member of the Securities and Investments Institute (MCSI), but also brings commercial awareness and flair to the businesses he invests in and advises.

MATCHING CLIENTS’ INTERESTS TO CLIENTS’ NEEDS We select real, serious, businesses, scaling-up not just starting-up. They often continue to go on to attract “proper” institutional later-stage capital, as well as strategic investment and trade interest. But it is earlier investors who have most potential for meaningful later gains, and with attendant EIS protections invariably attached. As examples of what is happening today in our Scale-Up Fund, we are excited that many of our EIS Fund investors (including a number of doctors, and private equity managers) are beneficial shareholders in FundamentalVR and Cyance, to pick just two of the Fund’s current twelve portfolio companies: in their case transforming the fields of surgery training, and usage of “buyer-intent data”, respectively, around the world.

Since joining Nexus Group from Deloitte in late 2013 to spearhead a new venture focussed division, Matt has sourced a large majority of Nexus Investments’ portfolio, and has invested personally into 18 of them as part of almost £12m deployed in that time. As part of his role, Matt reviews and appraises many of the fastest growing Ed Tech, Health Tech, Data and Digital firms in the UK, and currently sits on the investment committee which selects those to back. Building on a compelling track record of selection and growth of its EIS portfolio in the first 5 years, the Nexus Investments’ Scale-Up Fund is a an award-nominated Alternative Investment Fund (AIF) which Matthew now heads up. The Fund (at www.scaleupfund.co.uk) already has over £3.7m AUM since late 2018 launch – over doubling since one year ago - and is open for monthly investment from EIS investors (advised or direct) during 2020 and 2021. It focusses on the most promising fastgrowth Data, Digital, Education & Health businesses, and gives a wider-pool of investors a curated and diversified EIS portfolio managed by Nexus. Nexus in particular has access to unique and hard-to-find deal-flow in its chosen sectors, and its track record already suggests that longer-term superior returns for EIS investors may be achievable with appropriate focus on founders and active involvement from experienced industry investors.

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BLACKFI NCH GROU P

Dec/Jan 2021

ARE YOU READY TO MEET CLIENT

DEMANDS AROUND ESG?

Richard Cook, CEO and Founder, Blackfinch Group

THE RESULTS ARE IN Our adviser network recently took part in a survey on environmental, social and governance (ESG) investing. We aimed to ascertain client demand and adviser readiness for solutions aligned with ESG requirements. The results showed that over 80% of advisers believed Blackfinch’s commitment to ESG investing was important, or very important, to their clients. However, less than 50% stated that their business was fully prepared to accommodate clients’ ESG focus. Over 35% responded that they were in the process of preparing. Similarly, nearly 20% stated that while they had made a start on preparations, they would appreciate further advice. RESPONDING TO CLIENTS’ ESG FOCUS

– what will the world look like in decades to come? Within this, clients are increasingly concerned about the impact of their investments. With a growing interest in sustainability, clients want this to be based on an ESG approach. At Blackfinch one of our foremost aims is to preserve family wealth for future generations. We work with advisers to help clients create a legacy that will mean a better world for their children and grandchildren. For Blackfinch and our customers ESG is part of that. GAINING AN UNDERSTANDING OF ESG ESG can often seem difficult to pin down, with no one single definition and many different approaches. But, at its heart, it’s about investing with consideration for the impact a firm has on the environment, on society, and how it’s managed internally.

Advisers’ awareness of their clients’ attitudes to ESG is part of wider change. Across society, we’re seeing a greater social conscience. From recognition of the climate change emergency to the need for social justice and equality, people’s views are shifting.

ESG is key to creating a more sustainable world and to the strong future performance of individual firms. By focusing on ESG factors, investment managers can work to ensure that firms and funds in which they invest are taking a responsible approach, now and in future.

For many the coronavirus pandemic has crystallised their thinking, with concerns about the collective legacy

A provider with solid ESG credentials is what’s needed. That means a firm that works with ESG at its core, is

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transparent on its ESG processes, can help advisers educate themselves and their clients and offers ESG-based solutions. ESG: ANOTHER STRING ON THE PROVIDER BOW One thing ESG doesn’t mean is advisers or clients having to sacrifice any other element of the service and standards they’re looking for in a provider. It remains a given that advisers can look to partner with providers of ESG solutions bringing a solid track record overall. Advisers can seek out firms offering higher return potential and lower fees and charges, backed by expert yet accessible teams. The transparent approach should be evident in quality marketing materials and good communication. It also goes without saying that providers need to have rigorous due diligence processes. When viewed like this we can see that ESG is one key component of what firms offer. It also complements and enhances existing processes, bringing greater assurance of integrity. ESTABLISHING GENUINE PROVIDER COMMITMENT TO ESG Advisers already have a multitude of things to consider when assessing if a partnership with a provider could be suitable for their clients. How can you know that a provider is the one-stop shop you need, including that their ESG positioning is genuine, embedded in their values and their investment processes? It’s important to weed out the firms that ‘greenwash,’ only paying lip service to the concept of ESG. As a starting point, advisers can look for providers with a background in ESG investing. They might have expertise in an area such as

renewables. Or it may stem from investing in innovative new firms making a positive impact. Adviser can also look for providers that are signatories to the Principles for Responsible Investment (PRI). A firm that has become part of this United Nations-backed global network and has publicly shown its dedication to ESG investing. It means the provider is working within a community seeking to build a more sustainable financial system. EDUCATION AND TRANSPARENCY AROUND ESG INVESTING With complexity increasing across financial markets, legislation and products, it’s important for advisers and clients to have a clear route into ESG. Providers have a key role to play in providing as much support and education as possible for advisers, and in turn, their clients. Those offering ESG-focused materials to share with clients, from overviews to insights, will be most helpful to advisers. These policies must explain how the provider assesses potential investments for ESG factors including the screening processes it uses. They should also cover what standards it holds them to, both at point of investment and on an ongoing basis. A company which has a longterm commitment to ESG will be looking at encouraging this in others over the long-term. ACCESSING ESG-FOCUSED PRODUCTS As advisers navigate the investment landscape, they’ll find many different approaches to ESG investing. This includes how to quantify ESG impact. Some commonality has emerged on this. Many ESG investors now draw on the frameworks set out by the PRI

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and the United Nations Sustainable Development Goals (SDGs). The SDGs are a universal call to action, expressing an intent to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere. The 17 SDGs were adopted by all UN Member States in 2015, as part of the 2030 Agenda for Sustainable Development, which set out a 15-year plan to achieve the goals. They have since become a foundation for many ESG investors. In turn, they’re a critical element that advisers can look for when assessing a provider’s products and ESG processes for clients. CREATING LONG-LASTING, SUSTAINABLE PARTNERSHIPS Providers that can deliver, support and educate on ESG in all the above ways will be key for adviser businesses looking to future proof. When this comes in the form of a partnership approach, it involves a provider listening to and supporting advisers every step of the way. It could include working together to design products from the ground up, so they’re aligned with both adviser and client requirements. It will also mean that the provider can adapt and be flexible, evolving products to continue to meet adviser and client needs.

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FURTHER INFORMATION At Blackfinch we’re working towards a more sustainable future. As an ESG investor we offer a range of ESGfocused solutions: • Adapt IHT Portfolios: Flagship Inheritance Tax solution with four portfolios including an ethical option, with ESG factors integral across all • Adaptation Funds and Managed Portfolio Service: Multi-asset outsourced solutions all aligned with Blackfinch’s ESG principles •

Blackfinch Ventures EIS Portfolios: Investing in innovative new technology firms creating a positive impact through solutions that can change how we live and work

•

Adaptations Partnership Programme: A bespoke service bringing expertise from across Blackfinch Group, to provide support for every stage and every aspect of an adviser’s business

To learn more about Blackfinch’s ESG capabilities and work with advisers, contact us: t: 01452 717 070 w: blackfinch.com e: enquiries@blackfinch.com

At Blackfinch we believe symbiotic relationships are invaluable. As the provider takes on adviser feedback, businesses grow alongside each other, with a shared focus on success. We’ve always worked with this approach and now we offer our fully fledged Adaptations Partnership Programme. It’s a bespoke service for adviser firms, dedicated to growing businesses and achieving advisers’ goals through resource sharing. We’re here to help advisers with ESG and more.

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PAU L WI LSON

A FINANCIAL HISTORY OF COVID-19:

IS SUNAK OUT OF AMMO? In this series of articles, Paul Wilson takes a long hard look at how and when decisions have been made as the UK Government attempts to deal with the effects of the global pandemic and also how effective these measures have been. This month he considers whether or not Chancellor Sunak has finally run out of ammunition to help the economy to try and fight off the extreme impact of Covid-19

he Chancellor stood up in the House of Commons on the 25th of November to deliver SR20, the much awaited 2020 Spending Review. Did he continue with the ‘do whatever it takes’ approach or is he now constrained by what he has actually got to give? The headlines from SR20 can be taken in blocks. On the upside, if you rely on government expenditure, core expenditure is rising 3.8% in real terms year on year (non-covid spending), the biggest rise for 15 years and an additional £27bn in real terms increase in capital expenditure is planned as well. However, as at 2 December, with the second Covid lockdown across England being rebranded and tweaked more than ended and the prediction that, for 2020 as a whole, the economy will leave the tax year 11.3% lower that it entered it, any spin on upside wobbles away quickly.

The stark reality of SR20 is that the UK Government’s Covid spending will top out at £280bn this year, with a residual additional Covid bill of £55bn next year. The cost of meeting these three objectives by the end of 2020/21 totals to some eye watering financial damage. Predictions are that unemployment is likely to rise to 2.6 million people, GDP down 11.3%, public debt racing past £2trillion, the relative level it was at in the mid-sixties before inflation whittled it down, to the lows of the millennium when public sector debt was just a quarter of the level it will reach in 20/21 as a percentage of GDP. Is this an unsurmountable obstacle? History says not. In the 1930s, the UK shouldered national debt exceeding 150%. The vertiginous rise in public debt occurred between 1939 and 46/47 topping out at 249.1%. The UK rebuilt itself from that low base so it can be done. But at what cost however and to whom?

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WHAT DOES THE FUTURE HOLD? For advisers, the big question will be how to protect clients from the potential threats of inflation, taxation and systemic business and behavioural changes affecting sector and geographic yields. It is mooted that CGT will be reformed, potentially rolling back the changes made by Alastair Darling and Gordon Brown in 1998 and 2007. Such a reform to a fundamental pillar of the tax system will have an enormous effect on the balance between the tax burden on those who deploy assets for earnings and those who trade or earn their income. Although there are no predictions of a return to 98% taxation on unearned income or the CGT position between 1965 and 1982, it seems likely that the system will change sufficiently to require portfolio rebalancing on a significant scale. The movement of money en-masse may well create an income opportunity for some advisers, however the withdrawal of entrepreneurs’ relief could diminish IFAs own retirement funds by up to £100,000 assuming no other changes.

For advisers, the big question will be how to protect clients from the potential threats of inflation, taxation and systemic business and behavioural changes affecting sector and geographic yields

Another question vexing analysts is what effect the changes in work patterns will have on travel and spending patterns and the location of spending when it occurs? The centre of London has been particularly hard hit by the “work from home if you can” guidance. Transport for London (TFL) has required enormous bailouts and businesses that service workers’ daily food, entertainment and amusement needs have been especially commercially undermined. Pension funds large and small are dealing with unpaid office rents and slashed demand. Buy-to-let landlords in central London have seen shock rental drops.

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Will the government incentivise the population to return to work in the city centres to help rebuild this economic ecosystem, or are we going to see a retreat from our city centres that will recreate the ‘hole in the donut’ effect that blighted many UK cities before the regeneration seen in the 90s and later? The answer to that conundrum will have a huge effect on investment flows and therefore on asset allocation. TAXING THOSE WHO HAVE A further set of reforms may occur around inheritance tax, either at the point of death, or the point of wealth transfer in the form of lifetime gifts. Intergenerational wealth has increased enormously as the Baby Boomers rode the post-war economic and asset inflation wave. The inequality of aspiration for younger people has increased enormously. The career and earning potential required to acquire a middle-class lifestyle as enjoyed perhaps 30 years ago, is now far out of reach for many who have no family money available to them. Or indeed to those who have. This has become more marked within the 20 and 30 somethings who want to buy a house. The days of 95% or 100% mortgages have passed. The twin spectres of having to wait many more years to save a sufficient deposit whilst also watching your spending power diminish in a rising market are an unpleasant reality for large numbers of people. An unexpected outcome of the Chancellor’s intervention on stamp duty and unpredictable human behaviour has been a significant boom in house prices in 2020. It seems likely that, for political as well as financial reasons, the state will significantly increase the percentage of estates it retains and recycles back into the economy on its terms rather than the legators. These changes, when they arrive, will keep accountants, advisers and solicitors heavily engaged for some time. WILL THERE BE A WEALTH TAX? In a sense there is already in the taxes on IHT and CGT. However, as things stand, there are no requirements to pay a periodic tax based on your assets held (Discretionary trusts aside), rather than on death or disposal. The mansion tax which was proposed in the Labour manifesto in the 2010 election would have been a version of this and had some

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public traction, so the principle of such a tax emerging is not unlikely. This may be in the form of council tax rebanding, or overtly as a wealth tax. The latter might be seen as the thin edge of a new tax wedge, but it is in times of turmoil that such wedges make their first debut. AUSTERITY? Sunak has said there will be no return to austerity. However, a different kind of austerity has been inflicted on the economy with huge structural damage delivered to the arts and entertainment sectors, travel, hospitality and traditional retail. It is possible that demand for these sectors will ultimately re-establish itself to pre-covid levels.

businesses require cashflow and capital to trade and the pressure on both these fronts is increasing. What was marked in the SR20 review was the lack of additional help for businesses as it becomes clear that some form of COVID restriction will remain at least until the end of the financial year, The bounce back loans to spur the summerâ&#x20AC;&#x2122;s â&#x20AC;&#x2DC;V shapedâ&#x20AC;&#x2122; recovery have been deployed, rates grants spent and freelancers are still hanging in the wind coping with a longer term existence on Universal Credit than anyone would hope for. Sunak may not be planning to revisit austerity, but neither is he going to provide any more insulation against the personal austerity of unemployment or business collapse. SO WHAT HAPPENS NEXT?

Sunak may not be planning to revisit austerity, but neither is he going to provide any more insulation against the personal austerity of unemployment or business collapse

What is less certain is whether the current owners and investors in those enterprises will survive to supply it. The Chancellor noted that corporate insolvencies were down this year, possibly as a result of the generous assistance of furlough, BBLs, CBIls, grants, rates relief and toleration of delinquency on rents and taxes, not to mention a temporary relaxation of company law in this area. But

At this stage nobody knows. What is apparent is that some houses of cards are falling, Arcadia being just one. How many other businesses and banks they take with them and the de-multiplier effect of loss of their turnover and expenditure is difficult to gauge. In particular, it is known that there is a tipping point on individual high streets, where shop closures start to drive shoppers away. Combine that with office workers staying at home during the day, disincentives to use cars in cities such as congestion and parking charges and a storm in the high street can become a tsunami. In previous times it would have righted itself eventually as people had to shop somewhere, but the internet has taken that place now. The market alone will not decide the future. Political decisions in the UK, in Europe and the rest of the world will have the greatest impact. These remain uncertain times.

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Dec/Jan 2021

IN THE

SPOTLIGHT IFA Magazine talks to Dr. Reuben Wilcock, Blackfinch Ventures, to find out more about how the company operates given its laudable aims to deliver successful outcomes for EIS investors, businesses and the economy, whilst maintaining a keen focus on positive impact as an ESG investor. We also delve into broader territory to discover what he thinks might lie ahead for the sector in 2021 and beyond.

IFAM: For readers who might not be too familiar with the Blackfinch brand, could we begin by talking about the business and how you operate? RW: As part of Blackfinch Group, Blackfinch Ventures aims for quality, simplicity and transparency in all that we do. Blackfinch was founded on evolutionary principles, inspired by the work of Charles Darwin. Our values of ‘adapt’, ‘evolve’ and ‘thrive’ run through every aspect our work. We care about successful outcomes for investors, businesses and the economy. This includes working in partnership with advisers, co-investing with clients as technology entrepreneurs and experts, and offering value-based products. The Group’s USP is also reflected in our commitment to a positive impact as an environmental, social and governance (ESG) investor. IFAM: When it comes to investing, what sectors do you specialise in and why do you believe that these are important? RW: We invest with a technology mandate. Our investments cover technology and technology-enabled firms operating across sectors. Firms’ offerings are based on ground-breaking

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Ultimately, our investee firms are making a positive difference in the world and we’re proud to be part of that

new concepts which have the potential to change the way we live and work for the better. As I mentioned earlier, ESG is core to our investment process, so we’re investing in firms that are aligned with our and our investors’ beliefs on ESG. These firms are offering products and services that can have a positive impact. This includes at sector level but is also evident at economic level through the creation of jobs and growth. Firms are also making an impact at client level through serving other businesses. Ultimately, our investee firms are making a positive difference in the world and we’re proud to be part of that.

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IFAM: 2020 has been tough for many businesses but has it been for you? What is your outlook for 2021? RW: Blackfinch Ventures has continued to progress and expand. We have remained fully operational during the coronavirus pandemic and continue to support all our investee companies through the disruption. It has been great to see many firms innovating and growing. This includes those in the Blackfinch Ventures EIS Portfolios. We also closed three new deals and made four follow-on investments in March 2020 while in lockdown. In May, we helped to launch the #ISOLATIONINTERN platform, partnering with investment firms and universities. This enables the acquisition of specialist talent by start-ups in line with social distancing: https://www.isolationintern.com. We’re looking forward to seeing our investee firms’ further growth and success in 2021. Many that have successfully adapted to the pandemic are set to emerge stronger. Direct to consumer brands and the trend towards premiumisation are interesting areas right now, as are innovative FinTech solutions based on the Open Banking changes. Blackfinch Group affirmed its commitment to ESG principles, including becoming a signatory to the Principles for Responsible Investment. With ESG core to how we work it was also the major theme in the Group’s recent rebrand. We have launched new websites for each of our businesses including Ventures, with increased online facilities for advisers, and revised and updated materials.

for key offerings. We have retained these processes as we continue to support advisers. IFAM: The UK appears to have a strong start-up/ entrepreneurial culture – what do you put that down to? RW: UK business and culture has long been infused with entrepreneurial spirit. History also tells us that the UK has consistently succeeded based on innovating in hard times. We are seeing history repeating itself in this great way now as many new firms successfully pivot with the pandemic. Academia has also been key. Our world-leading educational institutions have ensured that the UK has always been very strong on research and development. This has led to a healthy spin-out culture with many start-ups growing directly from university-based innovation. The Government has played an integral role in encouraging UK entrepreneurialism. This includes launching the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) in the mid-nineties to encourage investment in small, growing firms. There continues to be clear recognition of how vital entrepreneurialism is to the UK economy.

With a technology mandate, we’re fully aligned with the Government’s sharpened focus on EIS

Throughout the year, the Group also launched new products and services. The Adaptations Partnership Programme, available through Blackfinch Asset Management, enables adviser firms to take advantage of all the Group has to offer. This includes expertise within Blackfinch Ventures. Blackfinch can provide support at every stage and for every aspect of an adviser’s business.

IFAM: Looking specifically at EIS, how does your approach align with the Government’s ethos on EIS?

When lockdown began, the Group also introduced enhanced processes to provide further support advisers. These included help with completing applications by phone, payments by BACS and CHAPS, e-signatures on documents, editable online application forms and extended deadlines

RW: The Government’s changes to EIS in 2017, directing investment from asset-focused to innovative companies with genuine risk to capital, were an adjustment for investors. However, it demonstrated the Government’s ongoing commitment to EIS.

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It has also made sure that EIS is about getting funding to firms which are rich in ideas and innovation and are going to power the future UK economy. This is evident in many aspects of legislation, including the increased amounts which clients can invest and which companies can raise. With a technology mandate, we’re fully aligned with the Government’s sharpened focus on EIS. Through our extensive networks we’re connected to the kind of companies that the Government wants to support. We invest in the best new technology and technology-enabled firms from around the UK. IFAM: Do you have any concerns that future Government changes could undermine the scheme’s effectiveness? RW: We remain positive on Government support for EIS, which it launched in 1994. Moreover, alongside channeling money into new UK firms, over this time it has become a valuable tax-planning tool for investors. Taxation remains a key issue for the Government and taxpayers, but now more than ever, innovative early stage technology companies need investment to fuel theirs and the economy’s growth.

Dec/Jan 2021

IFAM: Do you see any clouds on the horizon such as Covid-19, trade wars or falling economic growth etc. that might spoil the party? RW: Geopolitical tensions and economic instability will continue to influence investor sentiment. Clients could become more reticent about investing overall. The impact of the coronavirus pandemic on individuals and businesses also continues to be felt. Specifically, the rise of remote working is going to shape several industries and the impact of that is likely to be considerable. However, the unlisted investee firms which make up EIS portfolios are likely to be slightly more insulated from economic shifts. Furthermore, as part of being innovative by nature, they’ll have an ability to keep adapting and evolving in this environment. Within the technology space, it’s these kinds of firms that we seek to support.

IFAM: If you could influence changes to the schemes, what would you suggest? RW: Gaining EIS advance assurance can be a complex and slow process for early stage companies. It would be good to see this process streamlined and simplified so that it doesn’t create a barrier in terms of investment timescales. IFAM: Has the continued confusion over Brexit affected the future of EIS? RW: The UK Government announced new legislation for EIS from 2017, a year after the referendum result, so in this context its future has not been affected. In practice we are not seeing Brexit create a big impact in terms of the ambition of early stage technology companies. Their ability to react quickly in the marketplace has placed them at an advantage over larger firms in this respect.

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About Dr. Reuben Wilcock Reuben is Head of Ventures, Blackfinch Ventures. He is an award-winning entrepreneur with 15 years’ experience founding and growing start-ups. His smart home energy spinout, Joulo, won a British Gas Connected Homes award and was acquired by Quby. Reuben was a leading figure in entrepreneurship at the University of Southampton, founding the accelerator Future Worlds, and mentoring over 200 entrepreneurs and 50 companies. Reuben has a degree in Electronics, a PhD in integrated circuit design and is an inventor on five patents. r.wilcock@blackfinch.com

Dec/Jan 2021

OCTOPUS I NVESTM E NTS

CLIENTS WHO CAN BENEFIT FROM

BUSINESS PROPERTY RELIEF

usiness Property Relief is a longstanding inheritance tax relief that can be a useful option as part of a client’s estate planning. Once a client has held a BPR-qualifying investment for two years, it becomes zerorated for inheritance tax. The client can then continue to hold the investment until death, at which time it can be passed on free from inheritance tax. This two-year period is significantly shorter than the seven years it typically takes for gifts to become fully exempt. Because of this, it’s common to think of BPR as an option for very elderly clients who have not done as much estate planning as they might have, or for clients who are in ill health. While such clients could indeed benefit by making a BPR-qualifying investment, they are not the only ones. Read on to see how BPR could benefit clients in a variety of different situations.

mindful, compared to five years ago, of potentially needing access to their money in later life . One of the advantages of a BPR-qualifying investment is it stays in the client’s name. That means if a client’s circumstances change and they need to access some or all of it, they can request to make a withdrawal, subject to liquidity being available. By contrast, once a gift is made it can’t be accessed later. BUSINESS OWNERS LOOKING TO SELL THEIR BUSINESS (OR WHO HAVE SOLD A BUSINESS WITHIN THE LAST THREE YEARS) If a client owns their own business (or a stake in one) and its activities meet the qualifying criteria for BPR, that means they should be able to pass on their shares in the business free from inheritance tax when they die.

It’s important to note that this type of inheritance tax planning puts capital at risk. The value of a BPR-qualifying investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. You’ll find a fuller description of the risks later on in this article.

If they sell some or all of their business, the proceeds would be subject to inheritance tax when they die, immediately increasing their exposure to inheritance tax. However, if they use some or all of the proceeds to buy shares in another BPR-qualifying business within three years, those shares should be zero-rated for inheritance tax from day one.

CLIENTS WHO WANT TO DO ESTATE PLANNING WHILE KEEPING THEIR CAPITAL IN THEIR OWN NAME

CLIENTS WITH A POWER OF ATTORNEY IN PLACE

Research published by Octopus earlier this year found that 89% of advisers reported their clients have become more

BPR-qualifying investments may be a suitable estate planning strategy where gifting or trust transfers are

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restricted or prohibited under Court of Protection rules because it is an investment that remains in the donor’s name. And unlike strategies that rely on life assurance, there is no underwriting and no medical forms to complete. Withdrawals can be requested at any time, for example if the donor needs additional funds for care home fees. However, withdrawals are facilitated by the sale of shares and so cannot be guaranteed. CLIENTS WITH LARGE ISA PORTFOLIOS An ISA offers valuable tax benefits during a client’s lifetime, but is still subject to inheritance tax along with the rest of their estate. However, a client can transfer some or all of their existing ISA into one that’s invested in BPR-qualifying shares. By doing so, they retain ISA tax benefits, as well as control of their money. Once they have held the new ISA for two years, it should be zero-rated for inheritance tax. It’s worth remembering that a BPR-qualifying ISA is likely to be higher risk than more mainstream stocks and shares ISAs. CLIENTS WHO HAVE INHERITED A SPOUSE’S ISA Since April 2015, surviving spouses of ISA investors have been able to make additional ISA subscriptions by being given a one-off incremental ISA allowance equivalent to the value of their spouse’s ISA when they died. This extra ISA allowance is available to a surviving spouse whether they inherit their spouse’s ISA or not. A client who inherits their spouse’s ISA can use this additional permitted subscription to invest some or all of the value of the spouse’s ISA into an ISA that invest in BPRqualifying shares. CLIENTS LOOKING TO SETTLE ASSETS INTO TRUST

Dec/Jan 2021

trust. This should not trigger a charge, as the shares would qualify for BPR and therefore be zero rated for IHT. THE RISKS As noted earlier, BPR-qualifying investments put a client’s capital at risk. The value of these investments, and any income from them, can fall as well as rise. Clients may not get back the full amount they invest. Clients should also be made aware that tax treatment depends on individual circumstances and tax rules could change in future. In addition, tax relief depends on the companies they invest in maintaining their BPRqualifying status. The shares of unquoted and AIM-listed companies can be more volatile than shares listed on the main market of the London Stock Exchange. They may also be harder to sell. REGISTER NOW - ESTATE PLANNING IN 2021 AND BEYOND Tune in to the Octopus Online Show on Thursday 3 December at 10am for an estate planning special. In-house experts and special guests consider what the future of estate planning might look like. How might changing client needs impact the estate planning you recommend? How will advisers work with other professionals to grow their estate planning business? And what client scenarios might become more common? For more information, and to reserve your place, go to octopusinvestments.com/octopus-online-show-6/ Jessica Franks, Head of Tax BPR-qualifying investments are not suitable for everyone. Any recommendation should be based on a holistic review of your client's financial situation, objectives and needs. We do not offer investment or tax advice. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. Issued: November 2020. CAM0100169.

A lifetime transfer of assets into a discretionary trust is a chargeable lifetime transfer, and can immediately trigger a charge of 20% on the amount settled that is in excess of a client’s nil-rate band. One alternative could be to invest in BPR-qualifying assets, hold them for two years, and then settle those assets into

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Dec/Jan 2021

STRATEGIC PLAN N I NG

REDESIGN TO

REIGNITE How are you planning your financial advice business for greater success in 2021? 2020 has been a tough year for us all so Michelle Hoskin, Standards International, brings her sound, practical take on a few of the key ingredients to consider as part of your strategic planning process

think it’s safe to say that at some point over the last ten months or so, as we try to adapt our lives to the Covid-19 pandemic, one or more of us have, at times, felt like we have literally been hit by a bus. Despite my positive disposition, there have been many times when I have been well and truly in that camp – much to my personal disappointment. But – despite how I am and still feel personally – I still have to show up every day as the leader of my business and on a wider scale as a ‘beacon’ for our profession. I’m with you when I say this, but I know that when we set up a business, we get excited by the good stuff. Excited about the freedom of time, the freedom to make our own decisions, to do things our way and once and for all set our own standards and meet them! We don’t ever expect to have to lead and run a business through a pandemic and we certainly don’t ever expect to have to repair and relaunch one afterwards. But this is the stark reality which we face right now – and it’s something that every business leader should be thinking about. With 2020 being an absolute write-off for so many reasons, I think we all have big expectations for 2021. For the masses, 2020 was about stabilising, steadying the ship and keeping things going. However, for some of the most deserving in the profession, many have seen huge

growth from leveraging an already amazing business, team and client family. 2021 however is going to be a whole different ball game. So what’s the plan? What are all of our businesses going to need in 2021? Here are some of the key ingredients in a recipe which I believe is needed for business success next year and beyond.

We don’t ever expect to have to lead and run a business through a pandemic and we certainly don’t ever expect to have to repair and relaunch one afterwards

1. A LOVE FOR IT You love it, you hire a team who love it and you take on clients who love it. But what is IT? IT is your business, IT is their jobs, IT is what they do, IT is how they do it, IT is who they do it for and IT is financial services as a whole. Working in this profession is like a calling: you can’t do half measures. You have to be all in. In fact, you have to be so far in that you couldn’t imagine doing anything else. The

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result is that when you all LOVE IT, the business will ooze success and we know that an all-round successful business is a happy business. And that is a great place to be.

When people feel understood, they feel valued, they feel cared for and guess what… they feel a part of something that matters – because they know they matter

2. A RULE OF NO COMPROMISE!… EVER! If something is not right, try to fix it. If something is not fixable, remove it. It may seem harsh and will, for sure, be painful and at times a lengthy process, but I promise you it will be worth it. It is amazing how things have a habit of all coming good in the end. If you make too many allowances and overcompensate for people and things that are not working, it brings a detrimental level of unhappiness to the team and all those who come into contact with it. 3. TOTAL AND PURE HONESTY People often say that I have a rose-tinted view of our sector (like that’s a bad thing?!). Well, that may be the case, but I have no intention of changing my view any time soon. Why? Because, while I may see our profession in a unique way( I am honest – I say what I see) I hold no punches and I tell it like it is. If I see something wrong, I will speak out; if I think something could be done better, I make the suggestion; if I think standards are slipping, I’ll raise them; and if I don’t like how people are being treated, I will stand my ground. This – I believe – is a level of honesty that we could do with much more of in our profession. As a business leader, I am 100% open and honest with my team. We have no secrets; we know our troubles and we celebrate our successes. We ALL know the numbers – the incoming and the outgoing – and that’s not all. You may want to sit down for this bit… we have internally published our personal salaries and earnings. STOP PRESS!! And why wouldn’t we? If one of our company values is honesty then how can we ever fully commit to that if we have secrets – regardless of what those secrets are? When you have no secrets, people feel a sense of belonging and inclusion. This is a feeling we all crave, and which ultimately leads to creating a great place to work.

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4. THE STRATEGY OF SEEKING TO UNDERSTAND BEFORE YOU SEEK TO BE UNDERSTOOD. Understand your people. By this, I don’t mean how many sugars they take in their tea, I mean really understand them. Understand what makes them tick, why they work, what makes them jump out of bed in the morning, what they dream of, who they love and why, and not forgetting what makes them sad and what makes them happy. As professional advisers and planners, you seem to be more than happy to spend the time to understand your clients at this level but feel that it is ‘inappropriate’ to understand your teams in the same way. When people feel understood, they feel valued, they feel cared for and guess what… they feel a part of something that matters – because they know they matter. A successful 2021 isn’t going to just happen. We are all a little bit bruised and battered after our experiences this year and we all need a little bit of something special for next year. So I’ll leave you with a closing note: a happy team makes happy clients who make a happy and successful business. It doesn’t work the other way around. I wish you all a happy – and successful - New Year!

About Michelle Hoskin Michelle Hoskin (aka Little Miss WOWW!TM) is well known for her endless enthusiasm and energy, infectious personality and unique outlook on what she describes as a “magical profession”. With over 20 years’ experience working alongside some of the world’s most successful financial services organisations, Michelle is an internationally recognised author, speaker, coach and leading expert in the design and implementation of international framework-based best practice standards. Michelle is pioneering a drive towards increased professionalism and operational excellence through her continued work at Standards International – the UK’s premier certification body for British and international financial services standards – of which she is the founder. She also most recently led a sector committee whose objective was to develop and launch an exciting new international standard for professional paraplanners. Relentless in her pursuit of a global movement of change within financial services, Michelle is fully committed to supporting financial professionals worldwide to achieve things they only dreamed were possible, and to working with them so that they become the best possible version of themselves.

Dec/Jan 2021

PORTFOLIO DIVE RSI FICATION

DIVERSIFICATION NEEDS TO BECOME TRUELY

DIVERSE Has Covid-19 meant that the traditional ways of seeking diversification within an investment portfolio are outdated? 7IMâ&#x20AC;&#x2122;s Matthew Yeates suggests that a new way of thinking is needed for effective risk mitigation

iversification has shown time and time again to be the best way to protect against market falls, such as the ones we have seen over the past few months.

None of us expected Covid-19, nor did we expect the scale of the lockdowns enforced around the world. Building in resilience against these unknown events through diversification is a vital step at mitigating risks. However, while we used to be able to simply rely on a mix of bonds and equities to achieve a relatively diverse portfolio, this is certainly no longer the case, and indeed no longer counts as true diversification in terms of properly spreading the risk in portfolios. As markets change and evolve, diversification has become ever more important, but the routes towards this have become broader and more varied. A NEW SOLUTION TO AN OLD PROBLEM

Traditionally, a balanced portfolio would include a mix of equities that would grow the pot, and bonds which would provide some security during market downturns.

However, bonds failed to live up to their defensive role during the sell-off caused by the coronavirus. We would have expected these to rise when equities fall, providing some yield income to balance out the drop. This did not happen. The market movements over the past few

As markets change and evolve, diversification has become ever more important, but the routes towards this have become broader and more varied

months mean that most investors holding UK gilts are now receiving hardly any income at all. To make matters worse, some gilts now have negative rates, meaning that investors are actually in a position of paying the government to hold their bonds. As a result, many bonds now look very unattractive for diversifying portfolios as they no longer provide the guaranteed protection they once did.

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This means that investors should be looking for defensive options elsewhere, and in turn diversification itself now needs to take on a new meaning. THE CASE FOR ALTERNATIVE ASSETS We see alternative assets as a great way to fill the space which bonds once dominated. When choosing these assets, it is important to keep in mind that this pool of investments is vast, and investors should look to avoid illiquidity, high fees and becoming involved in an overly complex tangle of different restrictions.

We see alternative assets as a great way to fill the space which bonds once dominated

An example of a good alternative asset would be global real estate investment trusts (REITs). These trusts offer exposure to the global real estate market which diversifies investments away from equities but also offers liquidity, ensuring investors don’t get tied up with the asset. A further example would be the “event driven” strategy by Blackrock. Event driven strategies frequently come under the name of merger arbitrage strategies, focusing their investments in companies undergoing a process of mergers, either as a target or an acquirer. This strategy has the flexibility to invest across a mix of (mainly) equity-based opportunities arising from mergers and acquisition activity. There is a high opportunity for alpha in the space, with an associated insurance-like return for taking on merger risk. Even in the recent COVID period, merger deals continued to take place. Therefore investors could earn a return from simply being exposed to that risk regardless of the direction of broader equity markets. This more contractual return, on top of the alpha available, makes it a great option for portfolios of alternatives. The above strategy is led by Mark McKenna, who we see as a heavyweight in the space supported by a wide team, many of which have worked with Mark in the past. In more quantitative or systematic strategies we also see a lot of opportunities. For example, we favour the use

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of a number of liquid alternative strategies, including commodities on a ‘long short’ basis. Through this, investors can utilise the benefits from secure long-term contracts and the often volatile nature of contracts coming to delivery in a matter of months. It also invests in liquid markets which means it is low cost to implement. Such a strategy would have worked well when we saw oil prices drop dramatically earlier this year, by selling the stocks that had fallen the most. Geography also plays an important role and needs to be included in any approach to diversification. This doesn’t just mean looking to international stock and bond markets – although these can be an important way to diversify your holdings – but also involves utilising tactics such as holding foreign currency. This works by providing a buffer that can protect against the often volatile turns the UK’s pound can take, as we saw in 2020. This is another sensible strategy which offers a high level of liquidity should any rebalancing be needed. The past few months have shown that an over-reliance on bonds to defensively position a portfolio might not achieve the desired outcomes. Investors can achieve the same aims by instead increasing the scope of assets and strategies that make up the balance of a diversified portfolio. With the right strategy in place, alternatives can become a valuable source of diversification in a portfolio, one which can provide the same balance that bonds would have.

About Matthew Yeates Matthew leads alternatives and quantitative research at 7IM and sits on their Investment Committee. He was the lead designer of 7IM’s Retirement Income Service (RIS). Matthew joined 7IM in 2014 from Brewin Dolphin where he worked as a Quantitative Analyst in Investment Research. He holds a degree in Economics from University College London and is both a Chartered Financial Analyst (CFA) charterholder and a Certified Financial Risk Manager. He was named in the Forbes 30 under 30 list for 2020 and was the youngest of Financial News’ rising stars of asset management in 2017.

GE N E RATI NG RE FE RRALS

Dec/Jan 2021

HOW TO GENERATE

REFERRALS Having a sound client acquisition strategy in place is a key element in successful financial planning businesses. As you consider your strategic priorities for 2021, Faith Liversedge shares practical tips on how you can improve your approach to generating client referrals

f we didn’t already know how important generating referrals were to adviser businesses, the screenshot below makes it clear:

Referrals are where it’s at for most advisers and yet despite their importance, many people struggle to develop a strategic approach to generating them.

We’re British after all, and we don’t want to blow our own trumpets. Understandably, asking for referrals might seem pushy, and unless it falls naturally into conversation, might feel as if it’s coming across as desperate. Perhaps it could also be down to a lack of confidence about what you do? So, firstly, let me remind you that you’re doing great things. Selling is only sleazy or pushy if you want to make money at the expense of anything else, particularly a person’s wellbeing. But financial advice and planning has peoples’ wellbeing at its heart, and there’s plenty of evidence to prove it.

This might not matter to those advisers who are happy with their businesses ticking along. Referrals that happen naturally - almost accidentally - are of course great for business. But they’re not a great way to build a business. In increasingly uncertain times, having a structure in place for referral generation brings great peace of mind.

The reason many advisers shy away from formalising an approach to referrals is that asking for them feels awkward and salesy.

A STRATEGIC APPROACH If you want to do that, a more strategic approach is needed. But where do you start? WE NEED TO SHIFT OUR THINKING The reason many advisers shy away from formalising an approach to referrals is that asking for them feels awkward and salesy.

Research by Royal London for example, recently found that financial advice helps to increase the emotional wellbeing of customers by making them feel more confident and financially resilient when compared to those who have not received advice. It says that advised customers who have an ongoing relationship with their adviser are almost twice as likely to feel in control of their finances than those who don’t.

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(Another study of theirs also found that on average, working with a financial adviser will make you better off than if you take care of things yourself – to the tune of £47,000.) So you know what you do is great and you know that more people need it. If you don’t actively spread the word then these people will miss out and fail to benefit. If you think of it that way, then it removes the personal aspect from it you’re now fighting a cause. WHAT NEXT? So now that we’ve shifted our mindset and thrown off the shackles, what next? Well, now we can employ a different approach. One that’s less vague than “Who do you know who could use my services?” and one that doesn’t put people on the spot. I’m going to use an example here of an approach that I really like, kindly reproduced with permission from Chris Bow of Bow Financial: “Thank you for keeping me busy with referrals from your friends and family. Nothing is more satisfying in the job I do than people not only being happy with what I do, but having the trust to extend this to others. I always make sure that referrals are prioritised over other new business as they’re especially important to me.” This paragraph covers a number of bases in one fell swoop. Firstly, it tells the reader that you’re busy and that you love what you do. This takes away the desperation element; this clearly isn’t a hand-to-mouth situation. But even more importantly, it removes the risk element by telling people that if they do refer you, then you’ll prioritise that connection and that business. You’ve removed the risk of them looking bad if the referral goes wrong. This is really important; think about a time you’ve referred others in the past. It’s quite a big responsibility on the part of the referrer. Giving people the reassurance that those people who are referred will be given special treatment is a smart move. This will reflect well on referrers and, as we know, people really care about themselves; by adding an element of self-interest, you’ve made referring you an enticing prospect. CONTEXT IS EVERYTHING Also, you’ll notice that the tone of Chris Bow’s approach is very chatty. This is because the context for this request was within a regularly monthly client newsletter. As I’ve said in other posts, these are a great platform for asking for referrals because once the reader gets to that

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part, they’ve already received a lot in return (in the form of high-value, engaging, tailored information). And a regular newsletter enables you to vary the tone and frequency of the request. It also, literally, gives them something to share, to forward – you’ve made it really easy for them to ping your details to the person they’d like to refer. In terms of an alternative message, it’s also logical within the context of the Covid-induced restrictions in our lives, to suggest that many people will be re-assessing their priorities. It’s then a natural step to say you’re offering a “free, no obligation call to anyone your clients might know who is looking for a second opinion”. That way you haven’t said “please refer me”, you’re showing that you care about helping more people. Another approach would be to add a note to the footer of your email to say “We love to get referrals from happy clients. Please do pass our details on if you know of anyone who is looking for help.” It’s subtle and polite, and remember, clients might not realise that referrals are key to your business. THE SUBTLE APPROACH As you’ll have seen, none of these are face-to-face approaches which add to their subtlety. The pandemic is something of a get-out-of-jail-free card when it comes to increasing your digital communications so use the opportunity to its full potential. I’m not suggesting that hiding your referral inside an email signature makes it easier, but it does mean you’ve integrated a referral strategy into your business. You’ve made it part of your marketing plan. It’s subtle, suits the context and is automated. So what’s left? There are plenty of other avenues you can try and tactics to follow that include using different media, for example one-off referral campaigns using print media. But for that info you’ll have to pay me first - or refer me!

About Faith Liversedge Faith Liversedge is an experienced communicator with a wealth of knowledge and understanding of the adviser profession. She was Marketing Manager at Nucleus for 5 years, creating innovative and award-winning campaigns. Before that she worked for Standard Life, Prudential and Royal London. In 2017 she set up her own consultancy to help forward-thinking financial advisers and planners to become more profitable through websites, communications and other laser-focused marketing techniques.

Dec/Jan 2021

TONY CATT

SUPPORTING

EFFECTIVE MPS DUE DILIGENCE

This is the final article in IFA Magazine’s popular series looking at the detailed research which has been compiled by compliance specialist, Tony Catt, of TC Compliance Services, into Managed Portfolio Services. Here we highlight some of the conversations in our recent MPS webinar which discussed this analysis and considered how adviser businesses can support their due diligence process whilst ensuring that they are delivering the most suitable client outcomes when it comes to MPS selection

here is a range of resources available to advisers and paraplanners to help with the due diligence process and Tony Catt’s MPS report is one of these. However, as Catt explains, when he initially looked at the reports and analysis available elsewhere, they covered a core of MPS providers but “they each had some which did not appear on the other reports”. He went on to explain that “none of them had as much detail as I wanted or breadth of providers. So, I thought that I would just have to do it myself.” His report looks at 65 different investment management services with the aim of helping advisers to do better quality business.

can bring significant benefits. How do you find out the full range of products and services which are available on the market? But how do you decide which services to use? What criteria do you consider?

Whilst some firms will find that it suits their business and their clients to manage portfolios in house, more and more businesses are finding that by outsourcing the management of their clients’ portfolios to an external fund manager

On Thursday 12 November, we were delighted to welcome over 100 advisers to join us in hearing from six experts in the field of Managed Portfolio Services. During the webinar, attendees benefitted from a practical and high level discussion amongst individuals whose knowledge,

IT’S GOOD TO TALK These are just some of the challenges which adviser firms face when it comes to MPS. They are also some of the key factors behind Catt’s MPS Research Report and the expert discussion which took place on the MPS webinar held recently by IFA Magazine.

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TONY CATT

insight and opinions will help IFAs to shape due diligence and selection criteria around MPS and discretionary managed portfolios. Representatives from Asset Risk Consultants, Aberdeen Standard Capital, JM Finn, EQ Investors, TC Compliance Services and King & Shaxson came together to lift the bonnet on Catt’s MPS report and also to give their views on the range of MPS services currently available for IFAs and their clients and broader issues relating to how and why they are used. DRILLING DOWN INTO THE DETAIL The webinar discussion was ably chaired by Jonathan Gamble of Asset Risk Consultants. Gamble steered the experts’ around topics such as the impact of the Covid-19 pandemic, the active versus passive investment debate as well as questions around platform choice for MPS amongst many others. There was also wide discussion around the importance of Environment, Social and Governance (ESG) factors and responsible investing within an MPS structure. In particular, the role of specialist managers was considered to ensure that clients’ investment objectives could me accurately mapped to their all-important values around sustainability. Going forwards, this particular aspect will become of increasing importance as the panellists discussed and agreed, even though it now appears that new EU rules set to come into play in the UK next March might be shelved due to the Brexit situation. These rules, under the snappily named Sustainable Finance Disclosure Regulations (SFDR), would have meant extra disclosure requirements for advisers with regard to supporting evidence of clients’ objectives around sustainability being met within their investment portfolio. Whether these will be replaced with other similar rules in future cannot – of course – be ruled out. There were many other practical issues discussed too, all relating to the areas which Catt’s analysis covers. One of these questions related to considerations as to how an MPS provider would sit alongside another used within an adviser’s business, reflecting the different needs of client segments. With the panel suggesting that most advisers will typically use between three and five MPS providers, needing to ensure that there is a clear process in place in order to identify which provider would be used in which instance and why. Any discussion about MPS would not be complete without looking at cost, which is such an important aspect of any

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outsourced investment management service. An interesting discussion took place on this subject amongst the panellists with emphasis being placed on the need to deliver value for money for clients and to continue to drive greater efficiency whilst minimising the cost to the client. COMPLIANCE IS AN INVESTMENT During the conversations it was mentioned that “compliance is a cost”. Rounding off the discussion, Catt argued this from a very different point of view. He felt strongly that “compliance is an investment” and articulated his argument powerfully. Stressing that having effective compliance systems in place, including systems, knowledge and information to assist in due diligence, means you can not only remain in business but also deliver increasingly an efficient and effective service for your clients. For those who couldn’t make it on the day, many have already listened in to the recording of the webinar, which is still available for IFA Magazine readers to access via www. IFAMagazine.com https://ifamagazine.com/article/the-ifamagazine-mps-webinar-your-chance-to-catch-up-withwhat-our-experts-had-to-say/ IFA Magazine readers can purchase a copy of the MPS report by visiting www.IFAMagazine.com

THE IFA MAGAZINE MPS WEBINAR PANEL Jonathan Gamble – Director, Asset Risk Consultants – Chair Tony Catt – TC Compliance Services Freddy Colquhoun – Investment Director, J.M. Finn Craig Hart – Assistant Fund Manager, King and Shaxson Ethical Investing Damien Lardoux – Head of Impact Investing, EQ Investors Jim Stacey – Head of Intermediary Business Development, Aberdeen Standard Capital

Dec/Jan 2021

TH E LEGAL LE NS

CONVERTING TO A

LIMITED LIABILITY PARTNERSHIP How can you convert a partnership or limited company to a Limited Liability Partnership (LLP)? It may sound simple but it is an internal restructuring project that requires careful planning, consideration of the legal and tax implications for both the firm and its partners and significant management time in determining and implementing the relevant changes. Zulon Begum, and Nick Hawkins, of CM Murray LLP, a specialist employment and partnership lawyer, look at the key issues firms need to consider when converting to LLP status

onversion to a Limited Liability Partnership (LLP), which often refers to a change in the legal form of an existing general partnership or a limited company to a limited liability partnership, can bring significant benefits but it is a process which can go very wrong if poorly handled.

WHY CONVERT?

It is not as simple as a straightforward switch from one status to another but requires a much more forensic, considered, and structured approach. Failure to take due time and consideration when converting to LLP can cause significant risk, fallout, and instability â&#x20AC;&#x201C; not to mention that in some circumstances it could be voted down by partners.

LLPs are a popular structure for professional practices, for example the accountancy and legal sector. There are key differences between LLPs and traditional partnerships (established under the Partnership Act 1890) and limited companies. The LLP enjoys certain advantages such as separate legal personality and limited liability for its members (similar to the position for companies), whilst retaining some of the features of a traditional partnership, such as governance flexibility, tax transparency and the absence of capital maintenance restrictions (which apply to companies).

In this article, we look at some of the key aspects of converting to an LLP.

The tax transparency of the LLP structure means that the income profits/capital gains of the firm are taxed in the

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hands of its members and are not subject to corporation tax. Furthermore, provided the members of the LLP meet certain criteria, they will be treated as self-employed for tax purposes; the members’ earnings will consequently not be subject to employer’s national insurance contributions (which is a significant saving for the firm).

of any provision requiring a majority vote to approve the conversion, it is likely that a unanimous vote will be required, which may be problematic.

However, when the leadership team are considering a conversion to LLP, they must carefully consider their objectives, because the move to a LLP is not without its drawbacks. An LLP is obligated to comply with disclosure and filing requirements under the Companies Act 2006 (including public disclosure of the identity of the LLP’s members and persons with significant control over the LLP), as well as undertaking to file a copy of the LLP’s annual accounts, which may also need to be audited, with Companies House. This greater level of transparency may be a significant operational and cultural change for firms which are traditional partnerships and not currently subject to public disclosure requirements.

The LLP Agreement itself becomes vitally important. It is not actually a requirement to have one, but certainly advisable, and it provides the firm with the ideal opportunity to modify or improve its constitutional terms within a new LLP members’ agreement. It should be noted that there is no requirement to file the LLP members’ agreement with the companies registry (as required for the articles of association of a company) and therefore the agreement can remain confidential. An LLP members’ agreement typically contains the governance and financial provisions relating to the LLP, such as profit-sharing arrangements, benefit entitlements, decision making powers and retirement provisions.

There may also be a degree of unease about converting to an LLP given the significant costs, time, and administration involved, as well as the perception of ‘rocking the boat’. THE TRANSFER PROCESS There are a number of practical issues that arise when converting to a LLP. One of the first steps that the leadership team should consider is determining what the decision-making powers are for the purpose of approving the conversion, including consideration of any thirdparty approval that might be required. In the absence

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The proposed terms of the LLP members’ agreement may be substantially similar to the partnership agreement (in the case of a general partnership) or the shareholders’ agreement (in the case of a limited company) of the existing firm. However, firms often view the LLP conversion as an opportunity to introduce changes to the firm’s constitutional arrangements. If changes are to be made, management may need to invest significant time and effort in consulting with partners to ensure they are onboard with the proposed changes. Poor communication or failure to adequately involve the partners can result in considerable issues at a later date (sometimes unnecessarily so) and it is key to achieve

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a level of consensus among partners at the earliest opportunity, particularly if substantial changes are to be made to existing constitutional terms. Consultation with partners can flush out any objections, particularly if changes have been made to some of the more significant terms such as post-termination restrictions, exit terms and profit-sharing arrangements. This process can of course be time consuming, stressful and difficult as some partners may use the situation as leverage to negotiate more favourable terms. TRANSFER AGREEMENT As part of the conversion, a Business Transfer Agreement is also prepared which documents all the aspects of a business that are being transferred including the assets, goodwill, property, liabilities, work in progress, and employees (if there are any). If there are employees being transferred, the firm needs to ensure that an appropriate consultation process is complied with. Communication with employed staff is also key, without which it can cause unnecessary instability amongst the employees who may not fully appreciate the implications of the conversion. Further consideration would need to be given to contractual issues and whether material contracts (including client engagements) can be assigned or novated to the LLP. The firm will also need to prepare for operational changes and satisfy administrative requirements, including preparing relevant notifications to the firmâ&#x20AC;&#x2122;s bank, landlord, insurers, any applicable regulatory body and/or HMRC; registering a VAT number; appointing designated members; and updating the website/emails/letterhead.

DISSOLUTION AND WINDING-UP The process of conversion typically involves the incorporation of a new LLP that is separate from the old partnership or limited company. You are then left with the existing firm, which will usually be dissolved and woundup at the end of a run-off period. In the case of a general partnership, dissolution may be by the agreement of the partners in the partnership and will require a public notice of the dissolution. The business is then wound up by valuing any remaining assets and settling any remaining liabilities. Any surplus assets will then be distributed to the remaining partners.

About the authors Zulon Begum is a Partner and Nicholas Hawkins is Senior Associate at CM Murray LLP. CM Murray are leading specialist employment and partnership law advisers to multi-national companies, professional partnerships, senior executives and partners. If you are interested in converting to an LLP or have any queries regarding the issues discussed in this article, please email: zulon. begum@cm-murray.com

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M AGAZINE

GBI OPEN OFFERS A selection of tax efficient opportunities currently open for investment

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EIS

SEIS

Open

Evergreen

Amount to be Raised: £5m Minimum Investment: £15,000

Oxford Technology Combined SEIS and EIS Fund - “The Start-up Fund” Oxford Technology invests in high risk, high reward technology start-ups, in genertasl within an hour’s drive of Oxford, and has been doing this since 1983. The latest fund, OT(S)EIS made its first investment in 2012. By 30 Sept 2020 OT(S)EIS had completed 143 investments in 42 companies. Things continue to go well and in the most recent quarter, the tax free gain on the portfolio increased from £9.67m to £10.59m. The figures for the fund as a whole since its inception are as follows:

T. 01865 784466 E. info@oxfordtechnology.com www.oxfordtechnology.com

Gross amount invested by OT(S)EIS:

£7.19m

Cash back to investors via tax reliefs:

£2.77m

Net cost of these investments after tax reliefs:

£4.42m

Cash back from exits:

£0.24m

Fair value of remaining portfolio:

£15.01m

Total value: £18.02m Tax free gain (on paper only so far):

£10.59m

After tax losses on the three failures:

£0.046m

*OT(S)EIS investors who made an SEIS investment in Animal Dynamics, an Oxford University spin-out at 14p per share (7p after SEIS tax relief) in Jun 2015, had the opportunity to exit in March 2019 at 97p per share (so 14x the after tax share price). About 50% of the shareholders opted to sell with 50% opting to remain – the company is doing very well. OT(S)EIS remains open for investment at any time. We average about one or two new investments per quarter, and investors in the fund receive their pro-rata share of these. The latest quarterly report, with a page of information on each investment is downloadable from from www.oxfordtechnology.com.

EIS

SEIS

Open

Now

Multiple

Amount to be Raised: Evergreen

Minimum Investment: £10,000

Start-Up Series Fund The Start-Up Series Fund is an evergreen EIS & SEIS service. Managed as an Alternative Investment Fund by Amersham Investment Management Limited, authorised and regulated by the FCA. The service is designed for eligible subscribers to be invested in selected winners of the Start-Up Series, a monthly competition organised by Worth Capital Limited and promoted by smallbusiness.co.uk. The Fund invests in qualifying B2C or B2B companies with innovative products or services that can create new consumer behaviours in growth markets, with teams that demonstrate compelling marketing & communication skills and with a clear credible route to exit. • EIS & SEIS investments – choose EIS, SEIS or both • Businesses selected by real world, commercial entrepreneurs with deep brand, marketing, retail & innovation expertise – Worth Capital • A unique approach to UK EIS & SEIS fund investing – a monthly competition which has attracted almost 3,000 applications to date

T. 07768571271 E. pauls@worthcapital.uk worthcapital.uk

• Ongoing oversight from experienced investor directors – skilled in helping accelerate growth & reducing risk • Investments in ‘mini-portfolios’ of typically 3 or 4 businesses • Investments qualifying for attractive EIS & SEIS tax reliefs Any investment in the Start-Up Series Fund places capital at risk of total loss and will not be readily realisable. Tax treatment depends on individual circumstances and is subject to change. We recommend retail investors take professional advice before investing.

EIS Open

1st March 2020

Evergreen

Amount to be Raised:

Seeking to raise up to £30 million per annum

Minimum Investment: £25k

T. 0161 641 9475 E. ventures@praetura.co.uk www.praeturaventures.com

Praetura EIS Growth Fund The Praetura EIS Growth Fund will provide access to a unique selection of innovative growth companies that have an established proof-of-concept and commercial viability. It is intended for investors who want to achieve capital growth by investing in early-stage, unquoted companies which have the potential to increase in value significantly. Praetura are an active fund manager and work with driven management teams at the foundational stages of their business. Each of their portfolio businesses provide access to recurring, high margin revenue streams and have the opportunity for operational leverage once scaled. Areas of focus include; Creative, Digital & Tech, Financial, Professional & Business Services, Energy & Environment, Advanced Manufacturing and Health & Life Sciences. As an ‘Evergreen’ fund, the Praetura EIS Growth Fund will have two ‘soft closes’ per annum. The next soft close is 31st March 2021 and Praetura has announced an early bird offer of a 0% initial charge on all advised applications received by 31st January 2021. The Fund will invest into c. 8-10 promising young businesses and expect to fully deploy the capital within 6 months of each relevant close date. The fund is targeting a minimum return profile of 2x return on capital. This, combined with the tax reliefs available and Praetura's track record, offers investors an attractive investment opportunity.

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Open Offers

EIS Open

March 2012

Evergreen

Amount to be Raised: £10m - £25m per annum

Minimum Investment: £20,000

T. 0131 556 0044 E. pauline.cassie@parequity.com www.parequity.com

Par EIS Fund Recognised as "highly commended" in the 2020 EIS Association Awards for Best EIS Fund Manager. Across 19 realisations made to date, Par is demonstrating strong and consistent returns to investors. Par Equity is a leading EIS fund manager, investing in innovative, high growth technology businesses across the north of the UK. We harness the expertise and contacts of our Par Investor Network and wider contacts to create a distinctive, operationally focused investment model that benefits both investors and entrepreneurs. The Fund is focused on innovative companies. These are companies which are developing new technologies for sale or using advances in technology to disrupt existing markets. Par Equity has invested in companies operating in areas such as software, public health, e-commerce, social media, consumer electronics, photonics, technical textiles and medical devices. The unifying characteristic of Par Equity’s portfolio is therefore the importance of innovative technologies to the investment case underpinning each commitment of capital. In building the investment case, Par Equity draws on the experience, expertise and contacts of the Investment Team, but also the resources of individuals within the Par Investor Network. In this way, Par Equity can make informed decisions across a range of sectors, providing the potential for Investors, over a series of Subscriptions, to gain exposure to a diverse range of growth-oriented investments. Strategy for the Fund: • Focused on early stage technology companies with high quality management teams addressing global markets • Co-investing with experienced angel investors who add value to portfolio companies at each stage through to exit • Target portfolio of 7 - 8 investments • Target deployment within 12 months • Expected holding period of 5 - 7 years with a benchmark IRR of 15% Experience and track record of the Fund Manager: • 80+ years of EIS investment experience in the team • 239 EIS qualifying investments to date • 60 companies backed • £79m invested through Par Equity, leveraging a further £127m from third party investors • 9.8 months average time-frame to full deployment in 8 companies • 96 days average to receipt of EIS3 certificates. • 19 realisations achieved to date • 3.1x multiple (before tax relief) • 26% blended IRR • 4.1-year average holding period

VCT Open Close 21 October 2020 20 October 2021

Octopus Titan VCT Since 2007, Octopus Titan VCT has earned a reputation for backing pioneering entrepreneurs.

Amount to be Raised: £80 million

Octopus Titan VCT is the largest VCT in the market, with over £900 million of funds under management1 and a diverse portfolio of around 80 companies.

Minimum Investment: £3,000

Titan has a proud history of backing some of the UK’s most successful entrepreneurs, having made early investments in Zoopla Property Group, Secret Escapes and graze.com, among many others, and continues to provide backing to promising companies with the potential to become household names. Octopus Ventures is the team that manages the investments in Titan, investing mainly in UK-based tech-enabled companies with global ambitions and the potential to grow quickly. The team is one of the largest in Europe, and our network reaches from China to Silicon Valley from our base in London and office in New York.

T. 0800 316 2067 E. support@octopusinvestments.com

octopusinvestments.com

Octopus Ventures backs pioneering entrepreneurs who are changing the world, focusing predominantly on four key areas: Future of Health, Future of Money, Deep Tech and Consumer. Having deep expertise in these key areas helps attract the best entrepreneurs, who tend to have a preference for investors who specialise in their sector. It also allows us to find the best opportunities in each area more efficiently while continuing to build specialist skills and expertise. Titan early bird 1% discount ends 15 December https://octopusinvestments.com/our-products/venture-capital-trusts/octopus-titan-vct/ Key risks to keep in mind • The value of a VCT investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. • Tax treatment depends on individual circumstances and may change in the future. • Tax reliefs depend on the VCT maintaining its VCT-qualifying status. • VCT shares are by their nature high risk, their share price may be volatile and they may be hard to sell. Octopus Investments, 30 June 2020

VCT investments are not suitable for everyone. We do not offer investment or tax advice. This advertisement is not a prospectus. Investors should only subscribe for shares based on information in the prospectus and Key Information Document (KID), which can be obtained from octopusinvestments.com. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: November 2020. CAM010472.

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EIS Open

17 November 2020

n/a

Amount to be Raised:

n/a

Minimum Investment:

£50,000

Octopus Ventures EIS Service A new service from Octopus supported by Europe’s largest venture capital firm. We created the Octopus Ventures EIS Service to give investors the opportunity to invest in 10-15 early-stage businesses with high growth potential (each targeting 10x growth), handpicked and managed by our expert investment teams. The Octopus Ventures EIS Service could be suitable for those who want to target high growth from a long term investment, want to diversify their portfolio and those who want to directly own shares in exciting early-stage companies, providing they are comfortable with the risks of early stage investing. We believe that there are three stages to achieving capital growth from investments in early-stage businesses, which our specialist in house investment teams are experienced at delivering: 1. Access to investment opportunities that have the potential to achieve high growth. 2. Effective nurturing and support of a business as it matures. 3. The ability to manage a successful exit. For someone investing on their own, each of these stages would pose a challenge.

T. 0800 316 2067 E. support@octopusinvestments.com

octopusinvestments.com

We are fortunate that through 20 years of investing in smaller companies, we have established a reputation that means many talented entrepreneurs approach us with their ideas when they are looking for a first investment into their business. We also have access to an exciting range of follow-on investment opportunities in smaller companies seeking additional funding for further expansion. Key risks to keep in mind • The value of an EIS investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. • Tax treatment depends on individual circumstances and may change in the future. • Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. • The share price of EIS companies may be volatile and they may be hard to sell. EIS investments are not suitable for everyone. We do not offer investment or tax advice. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: November 2020. CAM010471.

VCT Open

25 September 2020

24 September 2021

Amount to be Raised: £25 million

Minimum Investment: £5,000

Octopus Apollo VCT Octopus Apollo VCT looks to accelerate the growth of proven businesses. We consider proven businesses to be those that have already brought their product or service to market successfully, have an established and growing customer base. Apollo seeks businesses with recurring revenue whose customers are other businesses, we find these companies are usually able to retain their customers well. In addition, Apollo looks for a clearly defined business model and a competitive edge. This may, for example, involve proprietary technology, industry-leading innovation or a foothold in a niche market. Apollo makes both equity and debt investments. In other words, we don’t just buy stakes in promising businesses, we also make loans to them. This mix means investors get access to a different risk-return profile compared to equityonly investments. Apollo launched in 2006, and now has a diverse portfolio of around 50 smaller VCT-qualifying companies. Our investment team provides funding and support to companies on the next part of their journey to accelerate them towards profitability. Apollo early bird 2% discount ends 15 December https://octopusinvestments.com/our-products/venture-capital-trusts/octopus-apollo-vct/ Key risks to keep in mind

T. 0800 316 2067 E. support@octopusinvestments.com

octopusinvestments.com

• The value of a VCT investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. • Tax treatment depends on individual circumstances and may change in the future. • Tax reliefs depend on the VCT maintaining its VCT-qualifying status. • VCT shares are by their nature high risk, their share price may be volatile and they may be hard to sell. VCT investments are not suitable for everyone. We do not offer investment or tax advice. This advertisement is not a prospectus. Investors should only subscribe for shares based on information in the prospectus and Key Information Document (KID), which can be obtained from octopusinvestments.com. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: November 2020. CAM010472.

EIS Open

30 November 2018

Evergreen

(monthly closes), next closes 30 November 2020 18 December 2020

Nexus Investments’ EIS Scale-Up Fund A leading FCA Authorised sector-specialist EIS Scale-Up Fund For 2020/21 that helps advisors & investors deploy targeted, specialist risk capital, empowering growth and productivity at this important time. We build each subscriber a curated portfolio of 8-10+ exciting, early-stage, EIS qualifying, businesses scaling up in the Data, Digital, Educational and Health sectors.

Amount to be Raised:

£10,000,000 (£3,582,750 raised to date)

Nexus is owned by entrepreneur and financier, Harry Hyman, who in 1996 founded, and is still managing director of Primary Health Properties Plc, a FTSE-250 listed Healthcare Real Estate Investment Trust with over £2.4bn AUM itself.

Minimum Investment: £25,000

Nexus also founded and runs Heath Investor, Education Investor and now Nutrition Investor, which are specialist B2B information, news and events titles for each respective sector. The only UK EIS specialist: – part of a wider corporate group managing >£2.4bn AUM – with 26 years group history (including a FTSE-250 Healthcare REIT) – solely Scale-Up, and since inception, solely Data, Digital, EdTech & Health

T. 0207 104 2059 E. nexusinvestments@nexusgroup.co.uk www.scaleupfund.co.uk | www.nivl.co.uk

– with exciting track record of Venture Investments since 2014 – with meaningful partial exits (+84% first-time score by MJ Hudson Allenbridge)

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Open Offers

EIS

SEIS

Open

April 2017

Evergreen

Amount to be Raised:

Up to £25,000,000

Minimum Investment: £10,000

T. 020 7071 3945 E. enquiries@growthinvest.com www.growthinvest.com

EIS

SEIS

Open

Evergreen

Amount to be Raised: N/A Minimum Investment: £5,000

GrowthInvest Portfolio Service The GrowthInvest Portfolio Service is a discretionary managed EIS & SEIS portfolio service that leverages the experience and expertise of the GrowthInvest investment team to select a diversified portfolio of some of the most promising companies that are brought to the platform, and the Investment Committee. Clients can invest in three different strategies in the GrowthInvest Portfolio Service. The first will target investee companies which qualify for SEIS reliefs only; these companies tend to be the highest risk that are often developing their minimum viable product and will be pre-revenue businesses. The second strategy will target investee companies which qualify for EIS reliefs only, i.e. those businesses that are already trading and require equity capital to expand their operations. The third strategy is a mixed investment policy which will target investee companies which qualify for both SEIS and EIS relief and offering a more moderate level of risk. The GrowthInvest Portfolio Service aims to return to clients twice the initial invested amount (not including tax reliefs) and is aiming to exit investments and return capital three to seven years after the initial investment into the Portfolio Service. GrowthInvest is an independent platform, which provides whole-of-market access to alternative and tax efficient investments for the clients of financial advisers, wealth managers and investors.

GrowthInvest - The Tax Efficient Platform for Advisers GrowthInvest simplifies research, investment and reporting on alternative and tax-efficient assets. Through our smart technology platform, we serve wealth managers, financial advisers, and their clients. Our core service offers: • A market-leading range of investment offers including EIS, SEIS, VCT, IHT and other alternative investments. • Reporting on all alternative assets in one online secure portal (including the onboarding of historical assets) • An extensive library of educational materials alongside research from independent partners,

T. 020 7071 3945 E. enquiries@growthinvest.com www.growthinvest.com

• Digital administration solutions and innovative products, driven by client demand, such as our diversified VCT service. • Personalised client service with an experienced team from institutional backgrounds: because technology is not always enough We have placed the adviser and their clients at the heart of everything we do. Contact us to discuss your specific requirements and for a demonstration of the future of alternative and tax efficient investing.

VCT Open

02/10/2020

30/09/2021

Amount to be Raised:

£20m Ordinary shares + £10m over- allotment facility Minimum Investment: £3,000

Blackfinch Spring VCT Growth-Stage Investing The Blackfinch Spring VCT invests in technology-enabled firms at growth stage, bringing a higher chance of success. We invest in firms that have already raised funding, gained traction and aim to accelerate the scale-up process.

Tech-Enabled Firms We’re focused on companies using the Internet, mobile devices and social media to offer better products and services. Exposure to different firms and sectors helps create portfolio diversification.

Return Targets We target firms offering the potential for higher returns at exit. They need to show they have revenue and customers, and are capable of disrupting large, growing markets.

Tax Benefits • Up to 30% Income Tax relief (minimum holding period five years) • Gains exempt from Capital Gains Tax (CGT) when investors sell shares T. 01452 717070 E. enquiries@blackfinch.com www.blackfinch.com

• No Income Tax on dividends

Discounts • 1.5% per share for new applications received by 3pm, 31 January 2021 • 1% per share for new applications received after then and before 3pm, 5 April 2021 • 1% per share for existing investors up until 3pm, 5 April 2021 Capital at risk.

I FAmagazine.com

IHT Open

Evergreen

N/A

Amount to be Raised:

N/A

Minimum Investment:

£25,000

Adapt IHT Portfolios Meeting the Inheritance Tax Challenge Inheritance Tax (IHT) legislation, set against property values, means this tax remains a challenge for many. Our IHT solution uses Business Relief for a swifter route to IHT exemption after just two years (and if held at death).

Diverse Opportunities Three investee firms provide access to a wide range of opportunities: • Lyell Trading: property development finance • Sedgwick Trading: renewables investment • Henslow Trading: asset-backed finance

Choice Each client can choose from four model portfolios. This means each can find what’s right for them in terms of sustainable investing, their objectives and risk profile. T. 01452 717070 E. enquiries@blackfinch.com www.blackfinch.com

• Ethical: focus mainly on renewables and low carbon projects, target return of 3%* p.a. • Balanced: focus on capital preservation, target return of 4%* p.a. • Balanced Growth: focus on capital preservation with growth, target return 4.5%* p.a. • Growth: focus on growth, target return of 5%+* p.a. *All target returns net of costs and charges

Value We only take an annual management fee of 0.5% +VAT after we have achieved the minimum target return on the model portfolio a client selects.

Control Clients retain access to and control of capital, enabling withdrawals if their situation changes. They can also take regular payments or leave capital invested. Capital at risk.

EIS Open

Evergreen

N/A

Amount to be Raised:

N/A

Minimum Investment:

£10,000 advised £50,000 non-advised

Blackfinch Ventures EIS Portfolios EIS Provider The Blackfinch Ventures EIS Portfolios are our open offering as a provider of Enterprise Investment Scheme (EIS) services. We have a strong track record in EIS, having previously raised funding across sectors. We’re passionate about supporting new firms as they grow.

Tech Focus We invest in forward-thinking new technology companies. Firms operate across sectors, with offerings based on ground-breaking new concepts, using highly specialised technology. With the potential to change the way we live and work, they’re set to make an impact in global markets.

Return Targets We target higher returns of 3-5x on investment, focused on successful outcomes for clients and companies. We identify firms early in their life and invest before they take off. Risk management is key to our strategy.

Tax Benefits • Up to 30% Income Tax relief T. 01452 717070 E. enquiries@blackfinch.com www.blackfinch.com

• 100% Inheritance Tax (IHT) exemption on qualifying investments after two years (and if held at death) • Capital Gains Tax (CGT) deferral relief (up to three years prior to investment and up to one year in advance) • Growth free of CGT (if Income Tax Relief has been claimed) • Offsetting of capital losses up to 45% • Carry back to previous tax year (for Income Tax relief) Capital at risk.

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Open Offers

SEIS Open

June 2019

Evergreen

Amount to be Raised: £3m Minimum Investment: £10,000

Jenson SEIS Fund Pioneer of SEIS investments, Jenson have been investing in early stage companies since 2012 with 108 investments. The Jenson SEIS Fund aims to target new innovative companies which are developing disruptive technologies with established plans and management teams, demonstrated growth potential with strong commercial opportunities with a planned exit strategy. The Fund is a generalist fund, thereby the sector focus is agnostic and the type of businesses and opportunities can be anything that is SEIS compliant (typically small early stage companies in non-capital intensive sectors). Jenson has a strong pipeline of investment opportunities. Highlights

T. 020 7788 7539 E. invest@jensonfunding.com www.jensonfundingpartners.com

EIS Open

July 2019

Evergreen

Amount to be Raised: £5m Minimum Investment: £10,000

T. 020 7788 7539 E. invest@jensonfunding.com www.jensonfundingpartners.com

• Target Size - £3 million in respect of the 2020/2021 tranche • Diversified Portfolio Size of 8 to 12 SEIS companies • Eight exits to date with a range of multiple returns from x.5 to potential of x12.

Jenson EIS Fund The Jenson EIS Fund has a mandate to focus on long-term capital growth and enables private investors to invest in a range of committed and ambitious entrepreneurs and their early stage growing companies. The Jenson EIS Fund predominantly facilitates syndicated follow-on funding to its existing portfolio, external opportunities are also considered allowing us to benchmark against our existing opportunities. Investing in our portfolio allows us to support management teams that we have already worked along side. All companies will be small unquoted UK companies that qualify under the EIS tax rules. The Fund is a generalist fund, thereby the sector focus is agnostic, and the type of businesses and opportunities can be anything that is EIS compliant (typically small early stage companies in non-capital intensive sectors). Highlights • Follow-on funding for 19 of our existing portfolio companies. • Syndicated investment strategy releasing £3 for every £1 of Jenson Investment. • Investee Company Voneus received £10m investment (potentially increasing to £30m) from Macquarie Partners.

EIS Open

Evergreen

Amount to be Raised: £10m Minimum Investment: £25,000

E. invest@o2h.com www.o2hventures.com

The o2h human health EIS knowledge intensive fund o2h ventures launched the o2h human health EIS knowledge intensive fund as the first HMRC approved knowledge intensive fund. The investment focus of the HMRC approved knowledge intensive fund will be therapeutic drug opportunities or technologies that enable drug discovery with an emphasis on Artificial Intelligence (AI). The geographic scope shall be UK wide, following on from the success of the ‘o2h human health EIS Fund. Knowledge intensive investing offers investors an opportunity to take advantage of the predictability of the tax year, from which they are able to claim relief. To date, investors in EIS funds claim relief when the funds are deployed into a business. However, in the new HMRC approved knowledge intensive funds, relief is dated when the investment into the fund is made (with carry back options depending on individual circumstances). The biotech sector is one of the leading sectors in the UK economy. The large pharma companies now rely on the small innovative biotechs for new ideas in disease areas such as cancer, genomics, anti-ageing and neurosciences amongst others which has led to higher potential exit valuations. The fund will widen the community of investors that will help expand early stage research in the UK. The o2h team are leaders in the biotech community and have been actively involved as investors, holding various board/industry positions as well as being engaged in grassroots scientific activity for over 20 years. o2h operate from their proprietary 2.7 acre o2h SciTech Park where they are developing a unique model for incubating small life science companies. Key Highlights The first HMRC approved Knowledge intensive fund • Portfolio Diversification - Investment in 5-7 portfolio companies • o2h Ventures, CEO & Fund Manager - Sunil Shah has been awarded UKBAA Angel of the year 2019 award as well as the OBN Special Recognition Award for his exemplary contribution in lifesciences industry • Closing Date – Bi annually (April and September)

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EIS Open

Evergreen

Amount to be Raised:

N/A

Minimum Investment:

£20,000.00

Newable EIS Scale Up Fund 3 The Fund seeks to leverage Newable’s unique corporate infrastructure to invest in knowledge intensive companies at the point of commerialisation and once a company has proven the concept through early-stage revenues. The investments are supported by Newable's wider platform, providing serviced offices, advisory services, and lending solutions. Newable also benefits from the expertise of circa 300 professionals, the Newable EIS Scale-Up Fund 3 has a unique eco-system from which to originate, undertake due diligence, execute, support, monitor and ultimately exit investments. The Fund aims to provide investors with a diversified portfolio of 7-10 knowledge intensive companies, offering investors exposure to an exciting asset class without the need to stock pick and commit management time. Newable is independently recognised as one of the UK’s leading investment networks and draws on a 36 year track record as well as long term partnerships with the U.K. government and business community.

T. 0785 091 5378 E. sanjeev.gordhan@newable.co.uk www.newable.co.uk

Risk is mitigated through a selection methodology and due diligence built around Newable’s +300 strong investor group as well as by leveraging the Enterprise Investment Scheme for early stage investments. Highlights • Newable can provide strong support at the scale-up growth stage, drawing on broader group resources across a range of disciplines including grant writing services, export services and innovation advice. • Newable curates one of the most comprehensive and sophisticated deal flow eco-systems in earlystage investing. This eco-system yields around 1,500 investment opportunities every year. • The Newable Ventures Investment Advisory committee has over 110 years of combined investment experience with a track record of making successful investments across the Innovation and Technology space. Recent examples include: • Atelerix: Invested Jan 2018 returning a 2.07x uplift in share price • Cognism: Invested in March 2018 returning a 3.42x uplift in share price • Hummingbird Technologies Invested in March 2018 returning a 2.25x uplift in share price

EIS Open

SEIS

Evergreen

Open

Evergreen

Amount to be Raised:

Uncapped

Minimum Investment:

£10,000

Nova Cofoundery SEIS & EIS Fund Members of the Nova team have spent the last 10 years developing their cofoundery model which we believe addresses 5 of the most common mistakes made by startups. The Fund is intended for those UK tax paying individuals: • Seeking a diversified exposure in a highly concentrated asset class to knowledge intensive companies in the UK • With income tax liability in the preceding or current tax years • With large capital gains to defer or mitigate • Who look to benefit from IHT relief

T. 0151 318 0761 E. alistair@novagrowthcapital.co.uk www.novagrowthcapital.co.uk

The minimum individual investment in The Fund is £10,000. At the Investment Manager's discretion, smaller individual investments may be accepted, however, this is not guaranteed. The selection of investee companies and the subsequent allocation of investor’s subscriptions to the investee companies are made at the discretion of the Investment Manager with guidance from the Investment Advisor. Highlights An engaged hands-on approach from an experienced startup team • Free of manager fees to the investor for subscriptions received via a financial adviser, facilitating 100% deployment of investor funds and aiming to ensure maximum tax efficiency for the investor • All SEIS and EIS tax advantages applicable, depending on personal circumstances and subject to HMRC approval • Target return of 172p for every 100p invested (Not including EIS or SEIS reliefs) • Performance fee aligns our interests with the investors

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Open Offers

EIS Open

Evergreen

Amount to be Raised:

N/A

Minimum Investment:

£100,000

Mercia BIR fund This Business Investment Relief (BIR) wrapper enables Resident Non-Dom (RND) investors the opportunity to very tax-efficiently invest in Mercia EIS Fund. RND investors can use BIR to bring off-shore capital into the UK potentially without taxation, in addition to the generous EIS benefits. Mercia’s EIS Funds have an investment-led venture capital strategy, investing nationally with a focus on the underserved regions; specialising in the identification, creation, funding and scaling of innovative technology businesses with high growth potential, creating a strong investment proposition. Mercia has an Investment Team of industry specialists with venture capital expertise, working extensively with portfolio companies to scale each business with the aim of ultimately delivering shareholder returns. Mercia can fund companies with different pools of capital, initially via its own EIS Funds or other thirdparty funds, and then selectively using Mercia’s proprietary capital. Mercia is therefore able to provide a ‘Complete Capital Solution’ for entrepreneurs and small companies, starting from seed rounds of £100,000, larger rounds of up to £2.0million, and building to funding rounds of £10.0million. Highlights

T. 0330 223 1430 E. enquiries@merciatech.co.uk www.merciatech.co.uk

Sustained Deal Flow - the consistency in both value and volume of Mercia's deal flow is hugely supported by deep relationships and networks in each region. Diversified Portfolio - consisting of approximately 15 EIS qualifying technology companies. Advance Assurance - will be sought from the HMRC for each investment. Proactive, specialist asset manager providing capital to regional SMEs (96% invested outside of London). Eight offices across the UK with 90 investment staff and 19 university partnerships. The Mercia Group has a substantial track record of delivering realisations from early-stage technology companies. This EIS fund is managed by a team that has seeded unicorns, and delivered some very high multiple returns for both EIS investors (Clear Review 8x Oct 2020, Native Antigen Company 8.6x July 2020) and Mercia’s other venture capital funds (Allinea 26x Dec 2016, BluePrism 104x July 2019).

EIS Open

Evergreen

Amount to be Raised:

N/A

Minimum Investment:

£25,000

Mercia EIS fund Mercia’s EIS Funds have an investment-led venture capital strategy, investing nationally with a focus on the underserved regions; specialising in the identification, creation, funding and scaling of innovative technology businesses with high growth potential, creating a strong investment proposition. Mercia has an Investment Team of industry specialists with venture capital expertise, working extensively with portfolio companies to scale each business with the aim of ultimately delivering shareholder returns. Mercia can fund companies with different pools of capital, initially via its own EIS Funds or other thirdparty funds, and then selectively using Mercia’s proprietary capital. Mercia is therefore able to provide a ‘Complete Capital Solution’ for entrepreneurs and small companies, starting from seed rounds of £100,000, larger rounds of up to £2.0million, and building to funding rounds of £10.0million. Highlights Sustained Deal Flow - the consistency in both value and volume of Mercia's deal flow is hugely supported by deep relationships and networks in each region. Diversified Portfolio - consisting of approximately 15 EIS qualifying technology companies. Advance Assurance - will be sought from the HMRC for each investment.

T. 0330 223 1430 E. enquiries@merciatech.co.uk www.merciatech.co.uk

Proactive, specialist asset manager providing capital to regional SMEs (96% invested outside of London). Eight offices across the UK with 90 investment staff and 19 university partnerships. The Mercia Group has a substantial track record of delivering realisations from early-stage technology companies. This EIS fund is managed by a team that has seeded unicorns, and delivered some very high multiple returns for both EIS investors (Clear Review 8x Oct 2020, Native Antigen Company 8.6x July 2020) and Mercia’s other venture capital funds (Allinea 26x Dec 2016, BluePrism 104x July 2019).

I FAmagazine.com

CANDIDATES Technical Paraplanner - AW537632 Salary Indicator: £35,000 Location: BIRMINGHAM •

Excellent Senior Paraplanner with a wealth of experience

•

Particularly good technical knowledge around Pensions and Investments

•

Experienced in writing reports for Pensions (DB and DC), Pension Transfers, Drawdown and Annuities, ISAs and GIAs, Onshore and Offshore Investment Bonds, Inheritance Tax Planning, Trust Planning, EIS and VCT o Mortgages, Protection and Annual Reviews

•

Proficient in the use of various software, including Defaqto Engage, Dynamic Planner, O&M Profiler, Selecta Pension, Morningstar Adviser Workstation, Cashcalc, and iRess

Paraplanner - AW174658 Salary Indicator: £40,000 Location: EAST LONDON •

This candidate is a Level 4 CII qualified Paraplanner/Technical Analyst Assistant who is hoping to secure a new role early 2021.

•

He has completed his CeMAP qualifications and is also looking to undertake further exams towards Chartered status in April and October.

•

With over 5 years' of experience working within Wealth Management, this candidate is confident in providing high quality, technical support to Advisers.

Paraplanner - KB484586 Salary Indicator: £40,000 Location: STAFFORDSHIRE •

A highly experienced Paraplanner with over 20 years in the industry

•

Experienced in writing suitability reports, handling pension transfer cases, conducting product & fund research, client contact and supporting the further team of advisers, paraplanners and administrators with technical knowledge and expertise.

•

Also familiar with cashflow forecasting and the software involved.

•

Looking for Paraplanner or Operations Manager/Training role

•

CII Level 4 Diploma qualified in Regulated Financial Planning and now working towards Chartered

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Currently working for a wealth management business with a first class track record in providing support to advisers and their clients.

•

Looking for a new position as either a paraplanner with route into advice or trainee IFA.

Financial Planner - DG495169 Salary Indicator: £45,000 Location: EDINBURGH •

Excellent DipPFS Qualified Financial Planner

•

Good technical knowledge particularly around Pensions and Investments

•

Currently manging 120 clients, £2.5million FUM, 25% of which is self-generated

CAREER OPPORTUNITIES Employed Financial Adviser

Job Ref: DG61729

Salary: £45,000 - £65,000 DOE

Location: EDINBURGH

The Opportunity We are working with a Chartered Financial Planning firm with beautiful offices with a central Edinburgh location. Their average adviser will write substantial levels of business given their brilliant back office and marketing support. With the majority of advisers earning north of £100,000 per annum. You’ll avail of full admin and paraplanning support, with every paraplanner in the team being Level 4 qualified and designated administrator support. For help with business development, you’ll be given access to a legacy client bank, immediately giving you access to clients to convert to new business.

Position: Paraplanner

Job Ref: UK61962

Location: PARKGATE – NESTON This is an opportunity for a Paraplanner to join a modern, professional and respected Independent Financial Adviser practice. The firm’s client relationships are based around understanding their client’s future objectives and going the extra mile to provide a personalised service.

The Opportunity A fantastic opportunity has been created for a Paraplanner to join a bespoke, growing business and work within a highly qualified team to provide assistance to the firm’s financial advisers. The perfect candidate will have experience of working closely with HNW clients and have experience of being client facing.

What’s needed for me to be considered? • Previous experience within the IFA practice • Experience with Intelligent Office desirable.

Position: Paraplanner

• Good product knowledge • Experience being client facing • Level 4 Diploma qualified or working towards this

Job Ref: AW61993

Location: CENTRAL LONDON • A highly regarded, Independent Financial Advice practice are looking to grow their close-knit team by bringing on a Paraplanner to start as of January 2021. • This client provides a trustworthy, and integrated approach to advice, with the importance of values being at the heart of their business. They have an excellent reputation within the industry and are looking to expand their team with a Paraplanner vacancy. • You will have the opportunity to directly support a Financial Adviser who works with long-standing clients; this includes writing suitability reports, attending client meetings and updating client records. • The opportunity to continually progress in this position is encouraged through professional development plans, and the full support to take Financial Planning exams.

Paraplanner

Job Ref: KB61032

Salary: £30,000 - £40,000

Location: CHELTENHAM

Our client is looking for a Paraplanner to support the successful Financial Planners of the business. You will be involved in the following: • Working within a team of experienced technical Paraplanners providing a range of support and technical assistance. • Carrying out compliant and detailed research and technical analysis to support advice given by the Financial Planners • Preparing complex suitability letters, replacement cases, fund switches and withdrawals • Directly liaising with clients as you process their cases and keep them updated on progress You will ideally be Level 4 Diploma qualified or working towards this with previous experience within a fast-paced IFA Practice and a high level of analytical capability.

Position: IFA Administrator Salary: £20,000 - £30,000

Job Ref: KB60755 Location: SHEFFIELD

During a period of key expansion, a position has arisen for an IFA Administrator and Marketing Administrator to support the successful Financial Planners of the business. Some duties will include: • Administration of both new and existing business, ensuring compliance and process procedures are followed • Preparing client valuations, applications and meeting documentation • Social media and website updates • Managing marketing strategies You will need previous experience in a similar role and knowledge of Intelligent Office system.

November 2020 November has been a mixed bag, it has been month of ups and downs with a lot of people worried about the COVID-19 situation, lockdown and job security. However, what we have found is the market has remained constant, if anything we have been ablet to help even more people. Companies are still recruiting and new candidates are reaching out to us more and more, sometime just on an informal basis. Like back in RDR times, the good companies who were ahead of the curve, didn’t see much change at all and so flourished. Now we are seeing companies planning ahead for 2021, making new hires and we have been able to build even more relationships to find that perfect match! If there is anything you are unhappy with in your current firm or would like to change, there is now a good chance we will know of a good company we can put your forward to. HEAT’s consultants are spread over the UK covering specialist regions, so get in touch.

Alex Russon Managing Consultant – Financial Planning Division, Heat Recruitment Alex.russon@heatrecruitment.co.uk 0117 284 1248

What’s next? If you are interested in any of the above opportunities, please contact us directly. If suitable, one of our specialist consultants will be in contact with you to discuss the opportunity in detail prior to submitting your Curriculum Vitae to the client. During this discussion, we will aim to identify your specific skills and motivations and, where appropriate, can also recommend other relevant opportunities to you that match your requirements.

And finally… If these specific vacancies are not exactly what you are looking for, please contact us to discuss other opportunities we may be recruiting for that aren’t necessarily advertised.

TELEPHONE

0330 335 8347 Visit the Heat Recruitment website for more details of these and hundreds of other jobs too www.heatrecruitment.co.uk

SUPPORTING PEOPLE AND BUSINESSES TO THRIVE WITH ETHICAL FOCUSED INVESTMENT SOLUTIONS. Blackfinch Group offers specialisms in asset management, tax-efficient investing, early stage investing, renewables investment and property financing. As an independent company, weâ&#x20AC;&#x2122;re free to execute our best investment thinking to deliver for your firm and clients.

Capital At Risk. Blackfinch Investments Limited is authorised and regulated by the Financial Conduct Authority Registered address: 13501360 Montpellier Court, Gloucester Business Park, Gloucester, GL3 4AH. Registered in England and Wales Company Number 02705948.

Happy Christmas (is the war over?) | IFAM94/GBI23 | December/January 2021

Articles inside

THE CASE FOR YEAR-ROUND EIS INVESTING

WHAT MIGHT 2021 HAVE IN STORE FOR EIS AND SEIS

PAR EQUITY IS THE BRIGHT EIS STAR OF THE NORTH