Skip to main content

Research reveals barriers to investment company use by IFAs

30 January 2020

Lack of knowledge and inertia are still key barriers.

The Association of Investment Companies (AIC) today publishes the key findings of research into the barriers to wider use of investment companies by independent financial advisers (IFAs).

The research was conducted by Research in Finance and consisted of 32 in-depth interviews as well as a survey of more than 300 advisers.

Research in Finance identified six main barriers to the use of investment companies, including a persistent lack of knowledge among advisers. All six barriers are outlined below.

While the use of investment companies by IFAs has increased since the Retail Distribution Review (RDR), with purchases on advised platforms now in excess of £1 billion annually, the majority of advisers still do not use investment companies.

Nick Britton, Head of Intermediary Communications at the Association of Investment Companies (AIC), said: “Though an increasing number of financial advisers are willing to consider investment companies for their clients, the majority have yet to add them to their toolbox. We commissioned this research to better understand the barriers to more widespread adoption.

“The research confirms that lack of knowledge is still a key barrier to investment company use among IFAs. The AIC has trained more than 7,000 advisers since 2011 and we continue to offer free training in various formats and locations. This year, we are planning to run more workshops than ever before, building on our commitment to training and education.

“However, there are other challenges for the industry to address. Some of these relate to the sales and marketing of investment companies, while others are to do with platforms and research tools. The AIC will be discussing the findings of this research with its members and their managers in order to understand how we can best address the barriers highlighted by the research.”

Key findings: the main barriers to investment company use

Through 32 in-depth interviews, mainly with advisers who do not use investment companies, and a quantitative survey of more than 300 advisers, Research in Finance highlighted six main barriers to investment company use among IFAs:

(1) The knowledge gap. Many advisers acknowledged that they did not have a good working knowledge of investment companies.

(2) Inertia. Some advisers readily admitted that open-ended funds represented the path of least resistance for them.

(3) Limited contact with asset managers. The majority of advisers reported that they have little to no contact with asset managers regarding investment companies.

(4) The influence of firm and network-wide policies. Common problems include investment companies not appearing on advisers’ centralised buy-lists, or some adviser networks automatically treating all investment companies as high-risk.

(5) Research constraints. Investment companies may be filtered out in advisers’ research processes, or simply not feature in the research tools that advisers use.

(6) Platform-related issues include the availability of investment companies on platforms, trading costs and model portfolio functionality.

-Ends-

Follow us on Twitter @AICPRESS

Notes

  1. The quantitative survey took place from 7th to 25th June 2019. The qualitative interviews took place from 30th July to 19th August 2019.
  2. Research in Finance is a specialist market research consultancy and publisher. The firm’s wide-ranging research capabilities and industry knowledge help leading asset management firms, life companies, insurers and industry bodies make critical business decisions and further their product development, marketing and communication strategies.
  3. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 363 members and the industry has total assets of approximately £202 billion.
  4. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.
  5. To stop receiving AIC press releases, please contact the communications team.

Announcements

View the latest investment company announcements or search the 12 month archive.

View announcements

Saving for children

Discover saving for children with investment companies.

Find out more

Case study questionnaire

Would you be willing to be a case study in the press?

Complete our questionnaire

Media enquiries

Annabel Brodie-Smith
Communications Director
Tel: 020 7282 5580
annabel.brodie-smith@theaic.co.uk
@annabelbrodies
@aicpress

Elmley de la Cour
Communications Manager
Tel: 020 7282 5583
elmley.delacour@theaic.co.uk
@aicpress

William Sanderson
Communications Executive
Tel: 020 7282 5584
william.sanderson@theaic.co.uk
@aicpress