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Adviser attitudes more positive towards investment companies post-RDR
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Most advisers are considering UK Equity income sector
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61% would like to buy investment companies through platforms
Research conducted by Citywire on behalf of the Association of Investment Companies (AIC) and the wider industry1 reveals that 42% of advisers intend to increase their allocation to investment companies over the next three years. The research into adviser attitudes to investment companies pre and post the Retail Distribution Review (RDR), announced at the AIC Conference for Directors today, indicates that advisers are shifting their views on investment companies from ‘indifferent' to ‘positive' post-RDR.
Sectors to benefit from RDR
The UK Equity Income sector was the most popular investment company sector that advisers are considering but, contrary to the widely held view that only the big retail sectors will benefit from RDR, their next most popular sector choices were Emerging Markets, Sector Specialist, Private Equity, Property and Country Specialist. Some specialist sectors were also cited when advisers were asked which investment company sectors they had already invested in. The sector that most advisers had invested in was Property, followed by UK Equity Income, Private Equity, Core UK Equity and Global Growth.
Factors when considering investment companies
For the advisers surveyed, the most important reason for using investment companies in a portfolio was low cost active management. Fund manager skill, available information about the company and the performance track record were the most important factors for advisers when considering investment companies. Discount opportunities, competitive costs, gearing and access to a wider range of asset classes were most often cited as the major benefits of investment companies, whereas discount volatility and gearing were the most common factors that have traditionally prevented advisers from holding shares in investment companies.
The majority, (61%) of advisers, would like to buy shares in investment companies through platforms and 51% would like to buy them through wraps. Fees were the most important factor when selecting a platform to purchase investment companies and just over half of the advisers expected dealing charges for investment companies to be more competitive than OEICs.
Most advisers (62%) view investment companies as a specialist holding, whereas 15% view them as a core holding.
Barriers to entry
Just over half of advisers mentioned concerns about liquidity as a barrier to entry. Other important concerns were: understanding the product, information/data, inability to compare investment companies with other products and lack of sales support.
Annabel Brodie-Smith, Communications Director, Association of Investment Companies said: "We are encouraged by this research, which indicates that many advisers will increase their exposure to investment companies over the next three years and that adviser attitudes towards investment companies will become more positive post-RDR.
"However, there's still a lot of work for the investment company industry to do to convince advisers of the merits of investment companies and to ensure that they have the necessary knowledge, information and skills to include investment companies in their clients' portfolios. Last autumn the AIC launched an education and communication programme on investment companies for advisers to assist in their RDR preparations and since then there have been over 600 viewings of the AIC's training presentations."
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