David Prosser praises Fidelity FundsNetwork’s announcement to introduce investment companies to its platform.
Slowly but surely we are getting there. The announcement by Fidelity that a broad range of investment companies run by 33 different managers will henceforth be available on its online investment platform represents something of a breakthrough. It will make it easier for advisers to allocate clients’ money to the sector.
We know this is something they want to do. Since the retail distribution review (RDR) of three years ago, financial advisers have flocked to the investment company industry, with a level playing field on commission charges encouraging more and more intermediaries to take the plunge. Yet advisers who have wanted to buy funds online have often been frustrated – not all platforms have offered a full choice of investment companies; in the case of the largest platforms, Fidelity’s FundsNetwork, Cofunds and Old Mutual Wealth - they have offered none at all.
That position – now reversed by Fidelity – looks more bonkers by the day, because it is so clear that there is considerable demand from advisers. Investment company purchases by advisers on those platforms that do make the funds available totalled £549m during the first nine months of last year according to Matrix Financial Clarity. That was 55 per cent up on the same period of 2014 – and 241 per cent higher than during the first nine months of 2012, before the RDR came into force.
Fidelity has always offered its own investment companies for sale on FundsNetwork but its decision to open up the platform to investment companies run by other fund groups means investors will now be able to use it to buy an additional 49 closed-ended funds. Almost all of the largest funds in the sector will be made available.
This is important not only in the sense that advisers want more choice for their clients – though they do – but also because it will facilitate broader financial planning needs. For example, investors with self-invested personal pensions on Fidelity’s network will now be able to use investment companies as part of their retirement planning strategy, an option previously denied to them.
The move reflects a growing realisation across the financial services industry that investment companies are an increasingly important asset allocation tool for many advisers. For example, last week, the fund research and ratings group RSMR has announced that it is adding investment companies to its “Research Hub”. RSMR said it was adding the facility precisely because financial advisers had been asking for it – the company counts 20,000 advisers amongst its users.
The pressure is therefore building on online platforms that haven’t yet found a way to add investment companies to their financial adviser offering. Those platforms that can’t find a way to offer advisers access to something they so clearly want, risk losing other types of business as intermediaries go elsewhere.
The positive way to look at that is in terms of opportunity. Currently, just three platforms – Transact, Alliance Trust Savings and Ascentric – account for 82 per cent of investment company sales to advisers according to Matrix Financial Clarity. That suggests innovative platforms have a real chance to capture market share with the right offer.