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Investors introduced to a world of alternative assets | Ten Year Retrospective from AIC’s Brodie-Smith

Annabel Brodie-Smith

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), looks back on the implementation of the RDR and explores how it ultimately opened up a whole world of alternative assets to investors.

“The Retail Distribution Review (RDR) was a huge moment in the last 10 years. RDR aimed to make the retail investment market work better for consumers and it raised the minimum level of adviser qualifications. Crucially for investment companies it banned open-ended funds paying commission to financial advisers. This meant that finally investment companies could compete with open-ended funds on a level playing field. The impact of this has been clear. Annual purchases of investment companies on adviser platforms have increased fivefold from £200m in 2012, the year before RDR came into force, to over £1bn in 2020.

“This is good news for investors. They are being offered a wider range of choice and the opportunity to harness investment companies’ benefits, from superior long-term growth to accessing a whole world of alternative assets.

“However, there is more work to be done. Despite RDR we estimate only around 10% of advisers regularly recommend investment companies to their clients. Lack of knowledge and familiarity are still key barriers for advisers. The AIC has trained more than 8,000 advisers since 2011. We moved our education programme online last year and have continued to train around 800 advisers about investment companies and VCTs since then. The number of firms purchasing investment companies on adviser platforms reached a four-year high of 1,746 in the final quarter of 2020 which is encouraging. I’m confident that the message about the greater suitability of closed-ended investment companies to invest in less liquid assets, including property, is getting through.”

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