Investments  

Surge in investment trust sales via advisers after RDR

Investment trusts could be benefiting from the RDR after all as advisers’ purchases of the funds rocketed last year after the regulatory initiative came into force, according to trade body data.

The AIC has said there was a 67 per cent boost in adviser and wealth manager purchases of investment trusts for their clients in 2013, through a range of six platforms that offer the funds.

It said investment trust purchases on the platforms were £328.4m in 2013, compared to £196.6m in 2012 before the RDR was implemented.

Article continues after advert

In the fourth quarter of 2013 investment trust adviser sales reached a record high of £86m, up 70 per cent compared to the last quarter of 2012.

However, the report also says total adviser sales of all products on the platforms rose by 46 per cent in 2012, suggesting a large portion of the rise in trust sales could have been down to greater general investment appetite on the platforms.

Before the RDR mutual funds long trumped investment trusts in the intermediary sales stakes because they almost always offered commission to advisers, but when the FSA banned commission in the RDR at end-2012 there were predictions that trusts could benefit.

Trusts, which are listed companies with a limited number shares floated on the stockmarket, tend to outpeform mutual funds, which create new units every time an investor buys in, in the long-term thanks to their ability to borrow money to boost their investments.

The RDR also requires that financial advisers who wish to market themselves as ‘independent’ consider the whole of the market - including including trusts - in picking the best products for their clients.

But in the wake of RDR implementation it initially appeared that advisers were continuing to shun trusts - something today’s research suggests has changed.

“One year on it’s clear that investment companies have significantly benefited from the RDR,” said AIC director general Ian Sayers.

“It’s excellent news that investment company adviser platform purchases have increased dramatically, albeit from a low level. Demand for adviser training continues to be strong, and we have seven adviser seminars across the UK starting in June.”

The AIC report was based on data from six platforms - Transact, Nucleus, Ascentric, Raymond James Investment Services, Elevate and Novia - and used Matrix Solutions’ Financial Clarity system.

It does not consider investment trust sales on the UK’s biggest platforms used by advisers, Cofunds, Skandia and Fidelity FundsNetwork, which continue to focus mainly on sales of mutual funds.

The report adds the most popular investment trust sectors for adviser sales were UK Growth & Income (18%), Global Growth (17%), Property Direct – UK (6%), Asia Pacific – Excluding Japan (5%) and Infrastructure (5%).