New research reveals how financial advisers are overcoming investment barriers

The lang cat has revealed how financial advisers are overcoming barriers to using investment companies with clients, under new research commissioned by the Association of Investment Companies (AIC).

The research, which includes detailed case studies of four independent financial advice firms, shows how advisers incorporate investment companies into their processes, and suggests that barriers to advisers using investment companies may be overestimated.

The lang cat has revealed that some of the commonly cited barriers to advisers using investment companies may not be as difficult as is sometimes thought, while a proper consideration of investment companies is seen as a must for truly independent advisers.

Consulting director at the lang cat, Steve Nelson, 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 includes a new report, titled You can do it: Overcoming the barriers to using investment companies on platforms, which identifies several positive trends for investment companies. These include the growing level of investment company assets, the rise of platforms that are ‘champions of open-architecture investment’ and the Product Intervention and Product Governance Sourcebook (PROD) sharpening the focus on a segmented approach to clients’ needs.

The suspension of Woodford Equity Income is quoted in the report as a development that ‘helped to kick off a meaningful conversation around some of the inherent sector biases towards collective funds.’

Head of intermediary communications at the AIC, Nick Britton, said: “Our previous research highlighted a number of barriers which stop advisers using 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.

“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. As the case studies show, investment companies can be suitable for a very wide range of clients and they should be considered on a level playing field along with open-ended options.”

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