Over 90 per cent of adviser clients satisfied with VCT experience, says Association of Investment Companies

Submitted 17/03/2021 - 10:36am

More than nine in ten (94 per cent) adviser clients are satisfied with their experience of venture capital trusts (VCTs), according to new research from the Association of Investment Companies (AIC) conducted by Research in Finance. 

In the AIC’s survey, advisers said more than two-thirds of their clients (68 per cent) feel that by using VCTs they’re supporting UK entrepreneurs and 67 per cent of clients value the growth potential of backing young companies early. 

Nearly two-thirds of adviser clients (62 per cent) believe that by using VCTs they’re supporting cutting-edge science such as healthcare and technology innovations and 52 per cent of clients appreciate they can support green technologies by using VCTs. 

Advisers reported that VCTs’ portfolio diversification, tax-free dividends, ability to trade on a stock exchange and proven track record were benefits of VCTs over other forms of tax-efficient investment. 

Nick Britton, Head of Intermediary Communications at AIC, says: “The research highlights a range of motivations for using VCTs beyond the obvious tax benefits. Clients like the feeling that they’re supporting UK entrepreneurs, backing cutting-edge science and getting in on the ground floor by backing young companies early. While VCTs remain high-risk, they now have a well-established track record and it’s encouraging that the overwhelming majority of clients are satisfied with their experience of VCTs.” 

Advisers reported that clients are most likely to spend any tax-free dividends they receive from VCTs (47 per cent), followed by reinvesting them in VCTs (36 per cent) and reinvesting them in other types of investment (13 per cent). 

Almost all advisers (99 per cent) recognise that VCTs offer tax benefits. Of this group, 86 per cent believe the upfront income tax relief is VCTs’ most important tax benefit, ahead of tax-free dividends (8 per cent) and tax-exempt capital gains (6 per cent).  

41 per cent of advisers feel that the VCT manager’s reputation is the most important factor when researching a VCT to invest in, followed by past performance (32 per cent) and the merits of specific portfolio holdings (12 per cent). 

59 per cent of advisers agree that the pandemic has made ESG considerations more important to their clients. 

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