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Smaller companies can play a meaningful role in financial planning, say advisers


Some 83 per cent of financial advisers think that investments in smaller companies can play a meaningful role in financial planning, according to a survey undertaken by ICM on behalf of Octopus Investments.

The survey, which polled over 200 financial advisers, revealed a confidence among the adviser community in the potential benefits of investing in smaller companies, from the different tax benefits on offer to the growth potential they bring.
The findings come on the back of Octopus’ survey in January 2014 which looked at confidence overall in the UK economy.
The survey of over 100 entrepreneurs, financial advisers, private and professional investors revealed that 81 per cent of respondents felt more confident about the UK economy in 2014 than they did a year ago, while 63 per cent of those surveyed felt UK enterprise and smaller companies had a significant positive impact on the country’s economic recovery.
Despite this, there is still a disconnect between adviser and investor awareness of the benefits of investing in smaller companies. Just 26 per cent of those advisers polled by ICM have seen an increased demand for smaller company investing in the last twelve months.
Guy Myles, co-founder and managing director of Octopus, says: “It’s encouraging to see that so many advisers are becoming aware of the benefits of smaller company investing to support financial planning. At Octopus, we have specialised in this area of the market for fourteen years now, and are passionate about the important role smaller companies can play in an investment portfolio. Not only are there attractive tax benefits available through government approved initiatives like venture capital trusts (VCTs) or enterprise investment schemes (EIS), but smaller companies can offer significant growth and income potential for investors over the long term. what’s more, it’s clear that many people really value the impact that the UK’s smaller companies have had on aiding our economic recovery in recent years, and many of our own investors welcome the opportunity to support the next generation of British businesses. It’s an exciting time for enterprise and smaller companies in the UK and the government continues to lend its support to this sector.”
As well as legislation to encourage investment into smaller companies, appear that recent changes to pensions, such as the reduction in lifetime allowance, have also been key to raising the profile of smaller company investing among advisers. Thirty nine per cent of those advisers polled would recommend a VCT or EIS as a tax planning solution for clients who have reached their annual pension cap.
Myles says: “It’s evident that restrictions on pensions have led to more advisers looking to alternative investment solutions for their clients’ planning requirements. In doing so, many advisers are starting to realise the benefits that solutions like a VCT or EIS can provide, and we expect this trend to continue. However, it’s disappointing to learn that demand among the broader investor landscape is still not reflecting the apparent confidence surrounding this rising asset class. While those familiar with the sector continue to show their support for it – we’ve just experienced our strongest month of inflows ever – these results also demonstrate that there remains a strong requirement for us to help raise awareness among investors of the benefits of smaller company investing. The onus is on us and other providers to help advisers really understand our products and to feel confident in demonstrating to their clients how they can be used as part of holistic portfolio management to solve their needs and deliver effective financial planning, as well as attracting increased investment into this important sector of our economy.”

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