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Estate planning: we talk to James Sore, Chief Investment Officer of SyndicateRoom

  • By Sue Whitbread

With a huge range of options and products for advisers to consider in the estate planning space, we talk to James Sore, Chief Investment Officer of SyndicateRoom, about what makes them different

IFAM: Who are SyndicateRoom and what makes you different?

JS: SyndicateRoom is an online, sector-agnostic investment company specialising in early-stage and growth equity investments. Now nearly 5 years old, our members have invested in more than 130 companies over 150 investment rounds. Our unique Investor-Led® approach allows individual investors to invest alongside professional investors such as Angels, VCs and family offices at the same price per share and share class as the professional investors leading the round.

We also operate the first and only passive EIS fund for early-stage investing, Fund Twenty8, which offers investors the ultimate in early-stage diversification by deploying into a minimum of 28 businesses across a variety of sectors.

We have built a strong history of delivering highly differentiated products and services to the investment market, and by putting the investor first, we are confident we will be able to deliver better long-term returns for investors than if we just focus on raising capital for a company.

IFAM: What are the main areas of business for you?

JS: Early-stage equity investment still makes up the majority of our business, but as our fund management permissions are now complete, we are now looking to scale that part of the business. Our aim is to provide investors with a single destination for investment; that means we will be offering different products continually, at different stages, risk profiles and sizes. We have achieved an awful lot in the 5 years we have been going, but this is only the start. There is a lot more to come.

IFAM: When it comes to estate planning, can you explain some of the ways in which you can help advisers and paraplanners to create effective solutions for their clients to minimise their future liability to IHT?

JS: We take a slightly different approach to how others have built products and services in the past. We start by focusing on how we can deliver value for investors – how we can give them something no-one else has been able to achieve, something that adds true benefit to them or a clear alternative choice. That’s how we came up with the idea for Fund Twenty8. We had built a very successful self-managed platform, allowing investors to build an early-stage portfolio as they saw fit, but when we looked at the market there were no products offering diversification. I am fascinated by the main market and how passive funds, more than 4 times out of 5, beat actively managed funds after fees. This fact totally changed my mindset. Diversification is the only free lunch in finance, yet there were no offerings for the higher-risk, early-stage space. So we built one.

With regard to estate planning tools, advisers and paraplanners have many different options at their disposal in order to help clients mitigate the impact of IHT.

One aspect where we offer an alternative to the standard offering is through the IHT benefits afforded to EIS-qualifying investments. As advisers will know, these can prove to be a useful addition to an estate-planning exercise as these assets, when held at the death of the investor, can benefit from Business Property Relief status, meaning they do not form part of the client’s estate from a tax perspective – as long as the two year qualifying term is satisfied of course. But I would not recommend holding a single investment in a high-risk, early-stage opportunity for tax-planning purposes. This is a highly risky strategy. Advisers might be more inclined to seek a large and diversified portfolio so that some of the risks are mitigated. Of course, you don’t get something for nothing – the downside of having a larger portfolio, such as one that Fund Twenty8 would provide, is that the returns achievable are also reduced since each individual holding makes up only a small percentage of the portfolio. One of the added benefits is that, should the investments generate a profit for the investors, these profits are usually free from Capital Gains Tax, so they are then free to invest further.

There have been many products that have primarily sought to skirt – or even flout – the IHT rules and as such HMRC has rightly clamped down on them. Many of these products, when you actually looked at them properly, smelt wrong from the start. Anything that is “no risk” or, for all intents and purposes, offers little to no risk, is highly unlikely to be within the spirit of the rules, even if it has technically been accepted. What we have now found are a number of high-profile cases involving celebrities and wealthy clients, all of whom were told by particular advisers that these were acceptable investments. They are now facing significant tax bills worth what they saved and sometimes even more than they invested. I’m not trying to scaremonger anyone here.  What I am reminding advisers of is that if an investment proposition looks too good to be true (e.g. if you get more tax cover than you are risking), it is more than likely not going to qualify. And even if it does technically qualify now, HMRC may well come knocking on the door a few years down the line as they now focus on the spirit of the rules as well as if something is technically not violating them.

So, the emphasis must be to continue to focus due diligence instead on services, companies and investments that truly invest risked capital and be willing to accept the corresponding potential for loss on particular investments if you expect HMRC to foot some of the bill and share in that risk. 

IFAM: How do you work with advisers, what support can you give them?

JS: We are privileged to work with a large and growing network of advisers, from small independents right the way up to some of the biggest in the UK. We have always sought to give professional advisers as much information as possible to help them to fully understand the options we can provide. We have recently started providing independent and industry reports which have been compiled on our products. A recent example of this was the XPM consulting report conducted by Nikki Hinton Jones on Fund Twenty8. This was totally independent and generated for one of her IFA clients, this was very well received by other advisers, as it is totally independent really allowing advisers to make informed decisions on behalf of their clients.

About James Sore 

James started his career at a boutique investment firm, originally as investment analyst and quickly moving to investment manager. He’s also built up his own private investment portfolio, while starting and selling companies. James is also a mechanical and electronics engineer with experience designing and developing products for world-leading brands such as Coca-Cola, Hershey’s, Pfizer and British American Tobacco.

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