VCTs are treated by the Financial Conduct Authority as designated investments. This means that advising on VCTs, like advising on most types of investment, is a regulated activity and the adviser must have the relevant permissions from the FCA.
Michael Piddock, business line manager for VCTs at Octopus Investments, says in addition to the regulatory requirements, some firms or networks like their advisers to undergo specific VCT product training.
Some managers, such as Octopus, will even provide this to advisers to ensure that intermediaries are able to recommend their products.
Regulatory requirements for advising on VCTs are, though, the same as for the wider collective investment universe.
While investment companies are listed securities Jemma Jackson, the Association of Investment Companies, says because they are collectives the FSA permissions that most advisers already have for open-ended collectives mean they would are authorised to give advice.
Advisers simply need to check the detail of their permissions to ensure they have the added specialism of securities and/or derivatives.
Jemma Jackson, PR manager at the AIC, says the organisation had reviewed the securities knowledge requirements post Retail Distribution Review and there is only one specific reference to closed-ended funds.
This, she says, requires advisers to “demonstrate an ability to analyse... characteristics, features, behaviours and risks of securities in the context of the market for these products”.
The FCA lists specific products and features advisers should have up-to-date knowledge on, including: equities; collectives; open and closed ended; asset value, pricing and gearing; asset cover, redemption yields; investment management styles and fund selection; and passported products.
Ms Jackson recommends the Chartered Institute for Securities and Investment as the “best place to go” gap-fill courses for advisers in these areas.
“Depending on the specific gaps you have you may find it beneficial to sit the CISI Private Client Advice and Investment Management (PCAIM) paper, as that will cover your advisory planning gaps as well and the more general securities gaps.”
As VCTs are publicly listed companies on the London Stock Exchange, Mr Piddock notes there is a good level of information on financial websites such as Trustnet, Morningstar or the LSE’s website itself about the products.
Additionally, as a listed company each VCT is required to produce an annual and interim report just like any other listed company and these will be available on each VCT providers’ website.
Jemma Jackson, PR manager of the AIC, says her own organisation’s website, www.theaic.co.uk, has performance data, information on ongoing charges, factsheets, portfolio information, dividend data and much more.
“Tax Efficient Review is another useful source of information, as are the financial pages and VCT managers themselves.
“Stockbrokers can also provide a good deal of information, as do publications such as Tax Efficient Review and Tax Shelter Report.”
