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Investment view

As the Isa season draws to a close with the end of the tax year, thoughts are turning to the big themes for IFAs in the coming months.

Credit Suisse fund of funds manager Gary Potter thinks clients are going to have more choice and better opportunities but this will inevitably mean more paperwork for IFAs.

He says changes to fund legislation, such as Ucits 3, will lead to more funds becoming available to the retail market but he also foresees significant amounts of consolidation between funds. He gives the example of Gartmore collapsing its capital strategy funds into its Sicav range, which means more voting requirements and consultations for IFAs to deal with.

He adds that he is lobbying offshore companies to gain FSA approval so clients can have easier access to their products and talks about the increased passportability of funds.

Potter says: “The bottom line for IFAs in the UK is not that investment issues will become more complex but that the amount of regulation affecting the industry will become more significant. If IFAs are holding funds themselves, they are going to be bombarded with paperwork, which means more time away from what they do best, which is seeing clients.”

He thinks there will be more outsourcing of the non-core aspects of the IFA’s role, not only through multi-manager products but also some of the regulatory and administrative functions.

Potter is also interested to see what will happen in the bond market. He believes the coming year will see a reversal of the massive move of money into credit bonds. If interest rates go up, there is the potential for people to lose a lot of money in the credit market, he says.

Morgan Peterson principal Lesley Anne Creffield thinks the public have learnt the lessons of the technology crash in terms of diversifying risk through asset allocation. While her clients are still generally cautious, she says they are more likely to diversify their portfolios now.

She also thinks there is potential for the self-invested personal pension market to explode as new legislation permits the inclusion of residential property.

Creffield says: “The opportunity to leave the family home to a sibling and avoid inheritance tax through Sipps will be a massive development. It is a loophole that the Government may yet close but it will change many people’s pension strategies.”

James Trickett and Son senior investment adviser Richard Moorfield thinks upcoming changes to pension regulation are already bringing new business through his door.

The migration to Sipps makes him concerned for the well-being of life offices which have taken a loss promoting stakeholder pensions. But Moorfield says: “They have got the fat on them to deal with it and we will do a lot of business out of it. Having been through a difficult time, the investment outlook is better. Provided nobody crashes any planes into any buildings and there are no wars in the middle East, we are likely to have a cracking year.”

Hargreaves Lansdown investment manager Ben Yearsley says clients are keen to take on more risk, albeit as part of a balanced portfolio. He gives the example of investors who seek stability in equity income funds but who are also into looking at special situations funds. He highlights Anthony Bolton at Fidelity, Nigel Thomas at Framlington and Derek Stuart at Artemis as strong sellers.

But despite a generally more optimistic feeling this year among the investment industry, concerns over mounting regulation are never far below the surface.

Alan Steel Asset Management chairman Alan Steel says he has thought about giving up the business because of the regulatory burden. Having moved from managing director to chairman, Steel says he now employs a younger man to do his previous job who is better able to cope with the pressures of regulation.

Steel says: “I am pretty fortunate. At 58, I do not really have to do this for much longer but there is a conspiracy led by the Treasury to get rid of independent advice and have people buying from the banks. I can see a lot of IFAs saying: ‘Forget it’ with the dog’s dinner that the regulatory environment has become.

“Even though we do everything we can to show the FSA we have complied with their rules, they can still turn round and accuse us of misselling on a whim.”

While the industry continues to face regulatory worries, there is the likelihood of a modest resurrection of investor confidence to coincide with Easter. While IFAs continue to feel burdened by distractions and background noise, they are relishing the prospect of offering their clients new options in the coming tax year.

Steel says: “I know I am ranting but we will survive. We will thrive. Like most IFAs, my first love is sitting with clients and inspiring them to do the right thing. I want to get back to it.”


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