Behind the scenes of film investing Advisers need to ensure they educate themselves on the complexities of film investing before offering it as an option to clients
The glamour of investing in film may be alluring to investors but advisers must be able to look beyond the glitz and understand the often complex nature of this type of investment.
money at a film outside of taxefficient EIS structures is the first mistake investors make. ‘Some investors do it without even going down the EIS route,’ says David Lovell, Operations Director at GrowthInvest, an independent platform providing access to tax efficient investments and a discretionary managed portfolio service. ‘This is the case where you have private investors who are looking at propositions and they’re not going to IFAs for the riskier parts of their portfolio, when they certainly should be.’ Kirsty Bell, Founder and Managing Director of Goldfinch Entertainment, says film is an area where ‘a little knowledge can be dangerous’ as people pick up on small bits of terminology without really knowing the meanings behind it, or crucially how it relates to them and their money.
Investing in film isn’t just about the red carpet and premieres, it’s a serious business with potentially rewarding returns if done right. However, it can also be a difficult area to understand due to the terminology, charges and structure of payments, meaning advisers need to educate themselves and their clients before committing any cash. The first point, which may seem obvious, is that advisers should only be investing client money in genuine film funds, rather than a ‘mate’s film’. Throwing
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Raimund Berens, CEO of film financing company IronBox Capital adds ‘we say to investors to never invest more than 5-10% of their disposable income and we sit them down and show them the matrix’ It all comes down to educating investors, but in order to do this, advisers themselves need to be educated on the benefits of using EIS to diversify client portfolios and when they are comfortable with that, looking at the smaller EIS offerings. EIS not only provides tax efficiency but also provide an alternative way
for clients to generate returns. But advisers should not be fooled into lumping all EIS together as there are some that are higher risk than others, and there is diversification within the EIS sector. Lovell says there have been some ‘big media EIS’ that have reached capacity as advisers pile into names they know. He believes part of this is a ‘slight fear of the unknown’ meaning there is a lack of willingness to invest with less well-known names. For him, investing in a number of EIS, not just well-known ones, boils down to ensuring diversification. ‘Diversification...needs to play an important part in an EIS portfolio,’ he says. ‘Depending on the size of the portfolio, if you’re looking at investing in the British film industry, that’s well-recognised globally and is a strength of the British economy, there’s also a need to diversify that portfolio.’ Diversification is something which Debbie Purbrick, Research and Development Manager at Mazars Financial Planning, is