Lauren Hardy, Portfolio Adviser, 15 MAY 2024:
Professional investors have urged the FCA for a consultation on misinterpreted regulation regarding ‘complex investment products’ by platforms, following fears that mandatory ‘test taking’ before buying into some investment trusts is dealing another blow to the already-ailing sector
They add that hampering the democratisation of investing through reducing retail access to real assets – which use investment trusts as vehicles for liquidity – could have negative consequences for both the UK stockmarket and the UK economy, warning that test-taking suggests the industry will go “back to the dark ages” of having to use a financial adviser before executing any trade.
Some DIY platforms in the UK – although not all of them – profess that regulation prohibits them from selling shares in certain alternative and specialist investment trusts without requiring investors to take a knowledge test. This is investment trust-specific, and is not required in order to invest in any other main market-listed company or AIM stock. Platforms known to enforce this include Hargreaves Lansdown, AJ Bell and Barclays Smart Investor..
However, not every platform requires test-taking before buying certain trusts, which calls into question the regulatory nature of the tests. While this is because some simply don’t offer specialist trusts, others cite ‘choice’ and ‘freedom’ as reasons to allow investors to buy products without test-taking..
Meanwhile, Fidelity chooses not to offer ‘complex investments’ through its platform at all, having taken the decision to remove certain trusts from its investable universe altogether – a list of which is published on its website. These include MIGO Opportunities, AVI Global, RIT Capital Partners and CT Global Managed Portfolio Income.
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