Recent research into the Alternative Investment Market carried out by Intelligent Partnership has revealed that 71 per cent of advisers recommend Aim investments to their clients, and 41 per cent of them expect their use to increase over the next two years.
The most commonly cited reasons for recommending Aim were growth (46 per cent), diversification (44 per cent) and IHT planning (44 per cent).
Aim was launched in 1995 as a sub-market under the London Stock Exchange, and so far it has raised more than £96bn equity capital for 3,654 smaller companies. As Aim is not regarded as a ‘recognised’ stock exchange by HMRC, a significant proportion of Aim shares have the added benefit of qualifying for VCTs and 100 per cent relief from IHT via Business Relief (BR).
Guy Tolhurst, managing director of Intelligent Partnership, says the combined effect of the pension freedom and lower pension limits and the inclusion of Aim shares in Isas have led to investors showing “an unprecedented interest in Aim shares, especially where they may be eligible for tax reliefs”.
Intelligent Partnership surveyed 120 advisers for the report. Of those surveyed, 60 per cent recommend Aim “sometimes” and 11 per cent recommend Aim “frequently”. However, a significant proportion (26 per cent) of advisers never recommend Aim at all.
Only 5 per cent of the advisers who recommended Aim thought they would reduce their use of Aim over the next two years.
In a follow-up discussion with some of the survey respondents, advisers cited financial planning ideas – such as making in specie transfers with Isas to a portfolio of BR qualifying investments, making Isas IHT friendly, or mitigating tax with VCTS – as some of the ways they were currently using Aim.
Some advisers voiced concerns that there could be a bubble forming in BR qualifying Aim shares, but Justin Waine, investment director for Puma Investment, who was interviewed for the report, argues there is no evidence of a bubble. He says shares are not going up regardless of bad news in a sector or the uncertainty after Brexit: in fact the shares were behaving exactly, as should be expected in these scenarios.
According to the report, three Aim-based VCTs and 12 BR investments are currently open to new investment. There have been 25 Aim-based offers via the UK’s tax-advantaged venture capital schemes since the inception of VCTs, EIS and BR. BR solutions are mostly evergreen and there are currently no open Aim EIS.
Ian Shipway, managing director of HC Wealth Management, says tax-efficient investments have their place in a holistic approach to financial planning and points out providers have upped their game in terms of communicating this. “The investment providers have matured,” he says. “In the early days the tax advantage was the only angle they pushed, whereas now it’s much more about being part of your financial planning and part of a portfolio route. There’s far more education than there used to be and they’re much better at putting their offer into context.”
Daniel Kiernan is an associate director of Intelligent Partnership