Financial planning for an SITR Social Impact Bond

May 5, 2015 2:46 pm Published by

Paradigm Norton (PN) and the Aspire Gloucestershire Bond – an end to end story of social investment advice in action with Lee Dunn.

The opportunity

Motivated by a social investment focused on an area close to their office in Bristol, and the fact that the product was applying for Social Investment Tax Relief, PN decided that the Aspire Gloucestershire Bond was an excellent opportunity to introduce social investment to certain clients they knew would be interested. “We need to give clients advice which shows that we have understood what they are passionate about, and social investment is another useful string to our bow, which just happens to have a good bi-product” Lee Dunn, Head of Client Investments.

  • The drive for the firm to offer this investment was client engagement. “We know our clients and what interests them, so we need to meet those client needs”
  • The Aspire Gloucestershire Social Impact Bond, arranged by Triodos, was the first such investment to qualify for Social Investment Tax Relief 
  • PN were alerted to this opportunity by Worthstone, who were able to make it available exclusively to Worthstone Founder Partners.

The challenge

PN’s main concerns were the short time scale for creating their process, and that this was the first time they had considered social impact investment from a due diligence perspective.

The approach

  1. Who would be the interested clients from our current knowledge?
  2. How are we going to approach those clients?
  3. What do we need to do with regards to due diligence?
  4. What does our PI insurer think?
  5. How receptive will the board be to making recommendations in this area and how do we get their approval?

The process

  • Identified clients who already had an interest in philanthropy
  • Emailed Worthstone’s one page summary to 15 clients. Lee says this outlining document was “integral for busy clients” and, after expecting they might be too busy to respond, he was surprised to receive four positive responses immediately
  • The PI broker advised there was no coverage issue regarding social investment in PN’s policy as long as their suitability process remained the same
  • The Board of Directors instructed solicitors to draw up bespoke suitability wording to give them peace of mind to proceed with this first case
  • Using the Worthstone summary document, the firm’s Head of Compliance, lawyers and paraplanning team drafted a recommendations report to be issued to clients
  • Sent recommendations report and application form to interested clients
  • As the advised investment tranche was limited to £50,000, Paradigm Norton offered the product as a fixed investment opportunity “all or nothing”.

The results

  • Obtained the suitability wording from the lawyers
  • Board of Directors signed off
  • One of the clients who didn’t invest, had identified a particular area of social need they were interested in that PN were not aware of previously.
  • The discovery process will become part of PN’s standard annual review agenda alongside Worthstone’s “What is social impact investment?” document.

Key result

Of the 15 clients contacted 10 expressed interest in SII of which 4 went on to invest in the Aspire Gloucestershire product.

Do you have big questions about Social Investment Tax Relief? Attend the Social Investment Academy on Thursday 4th June. 

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