Investments 

’Off platform’ IFAs help closed end cause

While the use of platforms by advisers continues on its upward trajectory, a large number of firms are yet to adopt a platform, analysis from IFA database MyTouchstone reveals.

The data shows that 164 IFAs started to use platforms for the first time in the second quarter of 2012, building on the 188 that started using the products in the first quarter of 2012.

The surprising element of the research, however, is that 8,400 IFAs are still to adopt a platform.

Peter Welch, IFA key account director for MyTouchstone, explains: “The data demonstrates that the trend towards platform use marches on, although many IFAs are still to recognise the full benefits of platforms.

“Although the number of IFAs placing all new business ‘off’ platform is slowly decreasing, our data shows there is still a significant segment of the market still to adopt a platform partner. With the RDR just around the corner, many firms may be deferring platform adoption until after they have made the transition.”

While these figures make interesting reading, the large number of advisers dealing “off platform” could benefit investment trusts. Although investment trusts are starting to appear on some wrap platforms and fund supermarkets, advisers largely have to deal direct with brokers and managers to access them.

Aberdeen Asset Management, a major investment trust manager, has continuously warned that the investment trusts need to “generate real adviser demand” before the larger fund platforms are able to realistically distribute the products.

In theory, the RDR should benefit investment trusts as it will force advisers who want to be defined as ‘independent’ to consider all the investment options available to their clients - not just open-ended funds.

David Barron, head of investment trusts at JPMorgan Asset Management, explains: “Investment trusts present new opportunities as they evolve and develop with the markets, and offer a wide choice to investors, from generalist trusts providing a broadly diversified portfolio to highly specialist trusts that can be used to target very specific areas of investment.

“Additionally, their structure can be more suitable than other investment vehicles for both new and more established areas of investment. The strong performance of investment trusts and their competitive charges means that they are an excellent choice for many client portfolios.”

According to Mr Barron, the requirements of the RDR mean that investment trusts are not only becoming more readily available through platforms, but they are also increasingly being classified by their AIC sector or objective rather than lumped together under one heading of ‘Investment Companies’. He suggests this will make identifying and researching different investment trust products simpler.

“Regulatory change is bringing in new charging models and broadening the spectrum of investment products to clients. As such, the introduction of the RDR should bring investment trusts back into focus,” he says.

“In some cases investment trusts may be used as a substitute for other types of investment vehicles, or they may provide exposure to markets and strategies not easily accessible through open-ended funds. However, in general investment trusts can provide an ideal compliment to existing strategies, offering additional diversification opportunities that can help investors meet long-term investment goals.”

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