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Platforms are dragging their feet over investment trusts

Platforms that do not include investment companies are missing a trick when it comes to differentiating their products

Annabel Brodie-Smith

The RDR has finally arrived and it’s all systems go. Last year we trained more than 800 advisers in investment companies and this year the training requests are still flooding in. Recently, threesixty asked us to present on investment companies and venture capital trusts to their members at their 10 investment events around the country.

One area where progress has been slower than we would have liked is the take-up of investment companies by the three biggest adviser platforms.

FundsNetwork intends to include a group of investment companies on the platform this year, whereas Cofunds has run a pilot with Barclays Stockbrokers. Skandia appears to be focusing on restricted advisers and has no short-term plans to include equities.

The fact that investment companies are not yet present on these platforms is in marked contrast to practically all the other platforms that have operated on a wrap basis and have included investment companies.

Transact has embraced investment companies since its launch, participating in a series of adviser roadshows with the Association of Investment Companies when it set up in the UK.

Last year Transact, Ascentric and Raymond James all participated in our adviser seminars as well as platform experts Platforum.

Not surprisingly, research on behalf of the industry indicates that buying through a platform and through a wrap are advisers’ top two preferences for purchasing investment companies, followed by purchase through a discretionary wealth manager. The third highest barrier to entry mentioned by advisers was ‘not available on the platform I use’.

This translates into a chicken and egg situation. The platforms say they do not see demand, whereas advisers say ‘we can’t buy investment companies because they’re not supported by platforms’.

The FSA guidance on independence clearly states that non-availability of suitable investment on a platform is not an excuse not to purchase for a client. It is also clear, having talked to the advisers that are attending AIC training, that many advisers are using multiple platforms – including the ones that have investment companies on them – to meet the varied needs of their clients. They use a couple of platforms to resolve this issue neatly.

Of course, it is early days for the RDR and the FSA’s response to the platform consultation is keenly awaited.

The proposal is that product providers should not be allowed to pay for platform services and clients will instead pay directly to the platform and not face any hidden charges. If this were to go ahead it would encourage platforms to hold the broadest range of investment products, including investment companies.

The AIC believes the RDR is the single biggest long-term opportunity for the sector. The inclusion of investment companies and other such investment products on platforms will be an important differentiator in a highly competitive market.

Annabel Brodie-Smith is communications director at the Association of Investment Companies


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