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17 November 2015

EIS due diligence qualification launched

Content team

The FT Adviser reports that a number of leading industry figures have called for due diligence to be carried out in-house for Enterprise Investment Schemes (EIS), and a training programme has been set up for those who want to learn more about the process.

While there is no existing consensus on how the process should be performed, there are concerns about the way in which some advisors are checking EIS products before recommending them to their customers.

Sarah Wadham, director general of the EIS Association, reminded independent financial advisors that they were required to have expertise in all the areas in which they were counselling clients.

She said: “Advising their clients on investments into EIS or Seed Enterprise Investment Schemes, whether through professionally run funds or via direct investment into qualifying companies, is only ever going to be a small part of their business.

“Having said that, IFAs have a responsibility to their clients to understand the market and the products on offer. Research from expert third parties is an important starting point to assess the range of possible investments available.”

She added that it could be difficult for a single independent financial advisor to carry out the necessary due diligence alone, so suggested that outside help could be a substantial part of the process.

This is particularly the case for businesses where only a few clients are suitable for EIS, making it financially unviable to maintain the necessary research resources and expertise in-house.

However, Ms Wadham was optimistic about the overall ability of independent financial advisors, adding: “Fortunately, between the range of research and due diligence information that is available to advisers, their own experience, expertise and client knowledge, most well qualified financial planners I know are able to make informed and sound decisions.”

To combat the challenges of EIS due diligence, the EIS Association has launched an online qualification to help independent financial advisors learn about the steps they need to take before recommending one to their clients. Participants will learn about the unique tax regulations that apply to EIS, as well as how to invest in them, and which clients are suitable for the initiatives.

Content team, Bureau van Dijk

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