VCTs - Ongoing Advice Fees?
SA96
Member
Does your advice firm charge an ongoing advice fee for VCTs?
I am personally in two minds.
The first five years of a VCT's life do not require any management. Selling the VCTs is not a viable option, so does the client really need ongoing advice?
Comments
We don't take ongoing fees for VCT or EIS for the reason you mention.
Essentially if it goes wrong after you have invested what can you actually do as an adviser? Not much unless it is past 5 years for a VCT as you would be advising someone to sell at a loss, and pay back their tax relief.
If something needed done after the 5 year period then we would look at charging an initial fee if it was being re-invested into a new VCT.
Agreed. We don't charge any ongoing as there's no value to add. We just provide an updated valuation at review time.
I don't see an issue with charging ongoing for a VCT. It's in scope for mifid II reporting, so you need to do work on it each year. Just because there are tax consequences for selling it doesn't automatically rule out that option if your ongoing work uncovers a problem.
It depends how you charge. If the firm runs an OAC that's all in percentage on everything and hasn't ever thought about not doing that, I can see that the easiest option would just be to not charge if there was a question of value for money. But work needs doing on that investment every year, so there is without doubt a cost.