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Split probe shakes IFAs&#39 faith in trusts

The Treasury select committee split-cap inquiry has not only scared advisers from recommending split caps but has also weakened their confidence in the investment trust sector as a whole, according to latest research.

The annual Money Marketing/One Account State of the IFA Nation poll reveals that 80 per cent of IFAs questioned said they were now less likely to recommend splits following the crisis.

Confidence in the £50bn investment trust sector as a whole has also wavered as a result of the inquiry, with 46 per cent saying the split-cap debacle had made them less likely to recommend investment trusts in general.

The results show that despite measures from the regulator to address the splits&#39 situation through increased disclosure and transparency, the inquiry has shaken advisers&#39 views on the entire investment trust sector.

The poll asked 215 IFAs their views on the industry during January.

LibDem Treasury spokesman Lord Newby says the results indicate that IFAs will remain wary of recommending splits in the future.

Newby says: “The problem with splits were the cross-holdings, the misselling and the high gearing which need not be problems in the future or the whole investment trust sector.

“I think, while the FSA has now got a grip of the situation, John Tiner has to address the issue of informing the public, who are still largely ignorant of exactly what a split is.”

The Association of Investment Trust Companies spokeswoman Annabel Brodie-Smith says: “Obviously, the split-cap problem has had an impact on the entire sector. But it is vitally important to recognise that only about a third of splits have problems and the rest have been marked down as a result. In the future, I hope that IFAs can keep an open mind and give investment trusts the opportunity to deliver their great potential, splits are just a small part of the sector.”


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