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Baiting the hook

Fidelity is offering IFAs £50 and their clients £25 to re-register their investments with its platform FundsNetwork. Do you see the offer working, either with clients or IFAs? With re-registration currently the main way for many platforms to gather assets, can you see rival platforms launching similar offers?

Hughes: As with any financial incentive, I believe it will attract some business to the platform but it is difficult to gauge to what degree. There is still a great deal of confusion from clients about re-registration and what it actually means as well as fund supermarkets in general as there are still plenty of clients not wanting to use one. I am sure that other platforms will be watching Fidelity with interest to assess the level of success but just how much these organisations can afford to offer an incentive is another matter.

Davidson: Yes, it is an interesting move and may spark a platform war if others are sucked into the bidding. It is clearly an aggressive app-roach designed to increase Fidelity&#39s market share. I suspect it is not making them a profit initially. When choosing a platform, there are a number of matters to consider. We happen to use Cofunds and like that they work through IFAs only. We looked at Fidelity at the time of choice and found that their branding was pervasive.

Bowes: It is likely that this offer will persuade those who were planning to reregister to get on and do it and I am sure that if it is seen to be successful, the other platforms will do what it takes to share in the business.

The Money Portal is set to embark on another acquisition spree once it secures a further tranche of funding. It says it is targeting nine broker firms, one of which is believed to be Chelsea Financial Services. If TMP succeeds in its aims, what impact do you think such consolidation will have on the industry? Will service improve?

Hughes: It was inevitable that consolidation was going to come to the industry as factors such as PI insurance, compliance and misselling have made it harder for many smaller IFAs to survive. TMP seems to be focusing on the better known firms for now but I believe the real consolidation in the industry has to come from the one-man IFAs. As with any consolidation, you hope it brings improvements to the industry in terms of increased efficiencies that make the companies focus on doing what they are good at, whether it is giving advice, discount broking or fund management.

However, history is littered with examples of where consolidation has not delivered the promised improvements and the financial services industry needs to find any way it can to improve its reputation and quality of advice and service. If consolidation brings this, we will all benefit.

Davidson: Consolidation is with us to stay – at least for the short term. There can be advantages to size such as economy of scale of costs and more muscle in purchasing power. However, cartels can emerge if there are only big players around and many smaller players have brought with them innovation so I hope the industry remains diversified as this will be healthy, with parties able to play to their strengths. Service improvement or otherwise will depend on how well the business is run, not its size.

Bowes: Unless through this consolidation TMP takes a significant market share, it is unlikely to have any impact on the industry. Consolidation generally leads to a rethink and streamlining of philosophy, process, product and, sometimes, even people. In theory, this rethink should lead to more efficient processes and therefore service, particularly if service has been considered as a major factor (it would be negligent in this day and age if it was not). However, whether or not service improves depends on how positively the people embrace these potential chan-ges and on their individual commitment to working as a team to see things through.

Henderson Global Investors has appointed Abbey National&#39s head of North American equities Geoff Paton to its technology team, seemingly to replace the retiring Paul Kleiser. Henderson is now best known for tech but is the sector something you are looking at currently? Is it too much of a hard sell to clients?

Hughes: The technology sector is not one we have looked at for some time. After a threeyear bear market, there are few clients who come to us who have the risk profile that makes single-sector funds such as technology appropriate and it is more a case of constructing a portfolio of core funds with good levels of diversification. There is also still reluctance from some clients to have exposure to the sector, even when it is appropriate because of the boom and bust legacy.

Davidson: We are finding little appetite for pure tech funds so we rarely recommend them. Losses from 2000 have not been overcome yet.

Bowes: As part of the asset allocation process, technology is something that we consider for those clients for whom it is appropriate. We have always viewed technology in the same way – it is a higher-risk sector so it is used for diversification only for those clients who are prepared to take some risk.

Hargreaves Lansdown believes the launch of a number of funds with Libor-based returns will confuse investors already struggling to comprehend the current range of funds. Do you agree? Could the launch of products such as Credit Suisse&#39s target return fund necessitate a lot more work with clients?

Hughes: I am in agreement with HL that Libor-based funds will confuse clients as you will struggle to find many people who have even heard of it, let alone know what it is. We should commend companies for coming up with innovative products for the retail market but the industry needs to ensure that they are relevant and needed in the market. It will mean that IFAs need to do more work with clients but this is no bad thing if the product is suitable.

Davidson: The investment area is innovative so complex products and additions are a fact of life. Investors are confused already which is why they seek advice. Any new launch can attract attention and fuel discussion with advisers. When investors take advice rather than buying off the page, there is generally less grief.

Bowes: No I don&#39t. This industry is constantly evolving and it is the job of advisers to recommend the most appropriate investments for their clients and help them to understand the benefits. The Ucit III rules will offer fund managers a great deal more flexibility and this will invariably lead to innovative investments. We should embrace this.

With the Isa season now over, have you seen a significant drop-off in sales? Are clients still ploughing into corporate bond and equity income funds or have they started to show an interest in other areas?

Hughes: As is always the case, ISA sales have slowed in the past couple of weeks following the end of the tax year. However, it has not been significant as it seems more people are realising the benefit of making use of the allowance early and sett-ing up monthly savings plans. It is fair to say that the majority of sales have been in both corporate bonds and equity income funds. However, this is only a small majority, with a definite indication of an increased appetite for growth funds.

Davidson: I have found in this Isa season that more people have opted for equity funds, having seen an upturn in value since last year. I have, as usual, requests from clients to recommend an Isa early in the tax year which I am doing. If Isas are suitable, then they will be recommended throughout the year.

Bowes: Business is pretty steady at the moment. We have not seen either an extreme increase in business over the Isa season or a drop in business afterwards. Over the past three months, fixed-interest funds have remained very popular but as the IMA figures show, the UK all companies sector is the most popular once again and has been for a few months.

Our clients are increasingly aware of the need for appropriate asset allocation and therefore are investing into a variety of areas, including bonds, all sorts of equities and property.

Ryan Hughes, investment analyst, Chartwell Invest-ment Management Anna Bowes, savings & investments manager, Chase de Vere FS Amanda Davidson, partner,Charcol Holden Meehan


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