Advisers are increasingly overcoming barriers to using investment companies with clients, new research carried out by the lang cat on behalf of the Association of Investment Companies has shown.
The research, , found that the perceived barriers to advisers using investment companies may have been overestimated and advisers now rate a proper consideration of investment companies as crucial to maintaining their independence.
The findings follow on from the AIC’s 2018 report “We have trust issues” which cited a market bias against investment companies, platform access and costs, and limited knowledge as the most common barriers.
Nick Britton, head of intermediary communications, Association of Investment Companies (pictured), said: “Our previous research highlighted a number of barriers which stop advisers used investment companies more widely. This report shows that some advisers readily overcome these challenges, or even see them as opportunities. The report challenges several preconceptions about adviser use of investment companies, namely that there is a shortage of information available, they are too complex, or that gearing, discounts or liquidity present insurmountable obstacles.
“What’s clear is that advisers using investment companies consciously assemble the tools around them, such as platforms and information sources, to enable that inclusion. They don’t just accept the status quo.”
Britton said investment companies’ strong performance record, income benefits and ability to offer exposure to a wider range of assets make them an “attractive option” for lots of investors and should be considered on a level playing field along with open-ended options.
Steve Nelson, consulting director, lang cat, commented: “Our previous work with the AIC shone a light on some of the barriers, perceived or otherwise, to adopting investment companies via the major UK direct-to-consumer and adviser platforms. That wasn’t just our view, it was clearly backed up by our various bits of research.
“When revisiting the topic, we were keen to speak to some high-quality adviser firms who are using investment companies as part of their client propositions. We were encouraged to see that some of these barriers may be easier to overcome than it may seem on the surface.”
The research also identified a number of positive trends for investment companies, including a growing level of assets, the rise of platforms that are “champions of open-architecture investment” and PROD sharpening the focus on a segmented approach to clients’ needs.
