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Independent view

While clearing out some old papers, a colleague came across one of our old newsletters from September 1985.

It was called the Unit Investor then, and it gave a market commentary and inv-estment review. What interested me as I took a trip down memory lane was how things have changed (or have they?) over the last 16 years.

In those days, you could recommend a unit trust based on your view of world stockmarkets and your assessment of the individual fund managers. It was, of course, prior to the Financial Services Act and you did not have a whole page of important investment notes and disclaimers, and as for key features, these were not even a glint in any regul-ator&#39s eyes.

I question whether all the legislation since has improved the sales process or investor protection at all. Whereas back in 1985 an adviser could say this is a good fund, this market looks right for the following reasons and therefore if it fits with your investment risk and financial requirements, buy it.

Today, you effectively say do not buy it whatever you do because of all the reasons laid out in 10 pages of key features or just in case we missed you the first time around, here is a cancellation notice which tells you after the event that you have done the wrong thing and get out while you can.

As I have mentioned, this was just prior to the Financial Services Act and we were even living in fear of the new regulations. We now face another change with N2. I am told that N2 stands for New Regulator Tranche 2, a pretty trendy title.

Whatever it is called, we are to be faced with even more stringent rules and woe betide us all if we fall foul of them. Having said this, I do believe that if the FSA allows time to bed the new rules in and does not go looking for a scapegoat early on just to show that it has teeth, then the new regime may well work much better than the old one.

I have always felt there should be one authority to cover all aspects of financial services work with specialist divisions dealing with those areas where particular expertise is required.

Areas such as stockbroking and investment management require a different set of skills from those providing personal financial advice to clients.

This was Professor Jim Gower&#39s idea when he first put forward the proposals for the Financial Services Act in 1986. I suppose that taking 15 years to get back to the original proposals is about par for the course when politics and the legal professional get together.

Our September 1985 news-letter made a recommendation on investing into Hong Kong. With the index then at 1,700,it now stands at over 11,000. An increase of about 650 per cent over 16 years would not have been a bad return at all.

It just goes to show how our investment world has changed. Back in 1985, we were only just beginning to expand our investment horizons as new funds were being launched to tap into these new opportunities which were then presenting themselves following the abolition of exchange controls in the early eighties.

Hong Kong fascinates me because I have been lucky enough to visit it at regular intervals over the last 10 years and, of course, it too has seen a great change with the hand back to China in 1997.

Whereas prior to 1997 there was great fear and consternation as to what this would entail, having revisited the area this year for the first time since the handover, I found an even more buoyant and affluent economy then existed previously.

Strange, isn&#39t it, that the anticipation of change often causes the most consternation but the reality of it turns out all right? Perhaps the same will apply to IFAs and N2.

Finally, the unit trust companies have changed somewhat since 1985. Three mentioned in that newsletter (Perpetual, GT and Britannia) are now one and the same whereas Prolific, Target and County have disappeared completely.

The unit trust world is changing but one thing which has not changed is the way in which you deal in the units themselves. This is still the longest paperchase in the world – prone to errors, with each unit trust group doing its own thing and adding to the confusion. This is one of the reasons why we have signed up with EMX as we see it as the only way to cut down on the paper, standardise dealing and reduce costs.

Stephen Lansdown is managing director of Hargreaves Lansdown

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