© 2019 Bluecoat Wealth Management

Decisions should not be taken based solely on the content of this website, individual advice should be taken first. Content is aimed at UK residents.

Bluecoat Wealth Management is an appointed representative of Best Practice IFA Group, which is authorised and regulated by the Financial Conduct Authority (FCA), FCA no. 223112. Registered Office: 11 Lady Bee Enterprise Centre, Albion Street, Southwick BN42 4BW. Registered in England and Wales no. 6828686. The Financial Ombudsman Service (FOS) is available to sort out individual complaints that financial services businesses and their clients are unable to resolve. To contact FOS please visit www.financial-ombudsman.org.uk

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When it comes to funds, the best advice is personal

July 30, 2019

 

The recent problems with the suspension of dealings in a heavily promoted UK equity income fund have exposed the blurred line between advice and guidance.

 

According to the Investment Association (IA), there are around 3,500 funds on sale in the UK. The IA sorts these into over 30 individual investment sectors, although about 10% are listed as being in the unclassified sector. Faced with such a large choice, understandably many private investors want some help in making their fund selections. The assistance they receive has come under the spotlight following the recent suspension of trading in the Woodford Equity Income Fund (WEIF).

 

WEIF’s manager, Neil Woodford, established a strong track record with Invesco Perpetual before leaving the group in 2014 to set up his own fund management business. Unsurprisingly, a large amount of money followed him to his new company. He was helped by a common feature of today’s fund marketplace: favoured fund lists. These typically consist of 50 –100 funds, spread across those 30+ IA sectors, chosen by firms whose main business is marketing funds to the public. The criteria for selection are not always specified, but there is often a heavy reliance on past performance. However, there is one aspect that is clear: if you pick a fund from the list, then it is you who are making the choice.

 

Favoured fund lists do not constitute personal financial advice, even if may investors think that is what they are receiving. At best they are a form of general guidance, attempting to sort some of the wheat from a large volume of chaff. A select list only supplies the selector’s opinion at the time. It does not offer you a recommendation based on your personal circumstances, including consideration of the other investments you hold, whether held directly or indirectly, e.g. via pensions. Nor does the provider of the list offer any ongoing support, an important factor in current market conditions.

 

 

There is a role for recommended fund lists, but there is no substitute for personal, regularly reviewed advice on your investments.

 

 

 

 

Articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional. Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise.

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