The Association of Investment Companies has launched a new service to help advisers determine which pooled investments they can recommend to ordinary retail clients in the wake of new rules that limit the sale of certain collective investments to mainstream investors.
With the introduction the Retail Distribution Review IFAs must consider all pooled investments which might be suitable for their clients, but under new rules designed ostensibly for unregulated collective investment schemes advisers cannot recommend any option defined as ‘non mainstream pooled investments’ by the FCA.
The new rules which came into force on 1 January 2014 mean that, in the retail market, promotions of Ucis will generally be restricted to sophisticated investors and high net worth individuals due to their often risky nature.
In the run-up to the publication of the FCA’s final rules, some feared the ban could extend to other tax incentivised investment products including venture capital trusts, enterprise investment schemes and real estate investment trusts.
The regulator had previously confirmed that it would not seek to include VCTs or Reits in the ban but was considering its position on EISs.
However, when the rules were published in June EISs were left outside the scope of the ban.
Believing these rules to be difficult for advisers to understand, the AIC has launched a tool to help with due diligence. The service provides advisers with a list of all the securities that the AIC’s members have confirmed can be recommended to ordinary retail investors under the new rules.
Ian Sayers, director general of the AIC, said: “The new rules determining which pooled investments a financial adviser can recommend to ordinary retail investors are complex. Advisers will need to take care in future to ensure that they understand which open-ended funds, ETFs or investment companies they can recommend.
“The service we are launching today will help to simplify the process for advisers considering investment companies for their clients and we believe it will become an invaluable tool for advisers looking to meet the requirements of the new rules.”