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Inv Trust boards failing to take advantage of RDR, says expert

Brewin Dolphin head of investment companies research John Newlands says he is “deeply concerned” investment trusts are not taking full advantage of the opportunities presented by the FSA’s retail distribution review.

The RDR forces financial advisers to consider investment trusts for their clients along with other investment products. Newlands, however, is predicting trusts will fail to take advantage of the opportunity.

“I am very sceptical,” Newlands says. “I do not believe that the trusts’ boards understand how great the opportunities are.”

The Association of Investment Companies set up an RDR working group in July 2010 to contribute to its RDR strategy and work programme.

The group is also intended to provide an industry forum to advise and provide feedback on the implications for investment companies.

Senior managers of investment companies, as well as self managed companies and venture capital trust man agers, have joined the group.

“The AIC’s RDR work aims to provide advisers with the necessary knowledge and information on investment companies,” says Ian Sayers, the director general at the trade body.

“The AIC is also working with the platforms to facilitate the inclusion of investment companies.”

Newlands, however, says unless investment trusts step up their efforts, advisers will still favour open-ended funds. The abolition of commission payments in the RDR is expected to benefit investment trusts, which do not typically pay commission.

Newlands says the industry is not doing enough to educate advisers and market their products.

Novia Financial, a small platform, offers investment trusts. Britain’s ’big three’ platforms, Cofunds, Fidelity Funds Network and Skandia, do not yet offer them.

“There are still elements of the RDR infrastructure to be finalised, for example, the consultation on platforms,” Sayers says.

“It is not surprising that some managers are yet to publicise their plans.”

Apart from getting listed on platforms, Newlands says investment trust managers will also have to give their shareholders a way to vote on corporate actions.

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