Your Industry  

Investment trusts on platforms

This article is part of
Guide to Investment Trusts

The recent ban on platform payments could be a good thing for investment trusts, as investment companies do not pay commission to fund platforms and so the playing field is now a lot more level.

Stephen Peters, investment trust analyst at Charles Stanley, says one of the reasons for investment companies previously being less prevalent in platforms was that it was harder for an IT to pay commission due to the difficulty issuing shares.

At the time of writing, investment companies are not available on the three biggest platforms, Cofunds, Skandia and FundNetwork, but are on many others.

Article continues after advert

In fact, says Mr Peters, there are a few platforms among the major shareholders of several investment trusts.

But the Association of Investment Companies believes the new FCA rules will mean the decision about whether to include a product on a platform “will now be driven by what consumers and their advisers want, rather than whether a product provider has paid for access”.

Platforms have hitherto claimed they have not received client requests to add investment trusts to the platform.

“Why is that?” asks Mr Peters. “Is it because fund management groups are not selling them? Or is it because they’re too complex?

“Platforms claim a ‘lack of demand’ but many will have trusts in the ‘not a priority’ box as they’re too difficult to make sure that everybody gets paid, unlike Oeics which are very scalable and so easy to pay everyone from.”

The introduction of the new platform payment rules means that consumers will now benefit from a clean pricing model where they will be able see exactly how much they pay for advice, the fund and the platform they use, says the AIC.

“This will allow consumers to compare platform charges more easily, increase competition and improve service standards.

“It will also encourage platforms to hold a broader range of investment products, including investment companies, which have not paid for access in the past.”