James Hay bans non-standard investment purchases through platform

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James Hay will no longer allow non-standard investments including overseas commercial property, storage pods and carbon credits to be bought through its platform.

The company says it will “continue to fulfil its obligations” with existing non-standard investments.

From today, new customers will no longer be able to buy non-standard investments through James Hay’s platform except for in SSASs.

From May the restriction will apply to existing customers.

James Hay lists the following investments as non-standard: intellectual property, land banking, overseas commercial property, peer-to-peer lending, unconnected loans, carbon credits, storage pods, UK unquoted shares, overseas unquoted shares, unquoted loan notes and bonds, second-hand endowment policies, and fractional property investments.

Unregulated collective investment schemes, closed-ended investment companies not realisable within 30 days and other special purpose vehicle and pooled investment structures that fall within the FCA’s definition of a non-mainstream pooled investment will also be banned.

Gold bullion will no longer be treated as a non-standard investment in James Hay products, however, and will still be allowed for new investments.

Investor appetite

The firm says that the change is a result of lack of demand and risk appetite.

James Hay chief commercial officer Mark Fleet says: “During 2016 we saw a dramatic reduction in the demand for NSIs. Because of the complexity and risk in many of these asset types of investments many advisers are no longer prepared to advise on them, instead preferring to streamline their investment solutions with simpler investment propositions.”

Fleet says: “NSIs now account for less than 1 per cent of our AUA and this figure will continue to fall. Combined with our risk appetite for such investments, we have concluded that restricting the ability to invest in NSIs is a sensible course of action.”

James Hay says its policy for non-standard investments held by third parties is under review.

Platforum senior researcher Miranda Seath says: “James Hay’s decision to remove NSIs from its platform sounds dramatic but seems fairly sensible. James Hay was the only major adviser platform to offer unlisted securities. Removing them brings it in line with its peers.

“James Hay avoids throwing the baby out with the bathwater by allowing gold bullion to continue to be held through the platform, if it is permitted by the tax wrapper – although advisers could also gain exposure to physical gold through ETFs. Peer to peer lending has promised a lot but hasn’t gained much traction with advisers. Removing it from the platform shouldn’t constrain advisers who can go direct to peer to peer lenders or specialist platforms like Goji.

 “It will be more interesting to see the outcome of James Hay’s review of NSIs held by third parties – which it states encompasses investment managers. If it chooses to wind these down, this could be significant. James Hay’s assessment of the acceptable levels of complexity and risk in the investment solutions that can be distributed through its platform would trump the investment manager’s view of products suitable for distribution to advised investors.”