Treasury move sees 10% drop rule ditched: reaction

by | Dec 12, 2022

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The government’s decision to remove the ‘10% drop rule’ is welcome news for advisers, says AJ Bell Investcentre head of marketing, Mark Rendle:

“This is welcome news for advisers, their clients and the industry as a whole and means 2023 will witness the removal of one of the least effective pieces of regulation on the books.

“The 10% drop rule was designed to ensure customers who’d lost touch with their investments over the years would be re-engaged, but for those already well-served by advisers the notice only created increased levels of administration and, in some cases, anxiety. Investment is all about the long-term and raising anxiety levels in this way always ran the risk of pushing consumers into making poor decisions based on short-term market fluctuations.

“The rule required customers to be informed of a drop in the value of their discretionary managed portfolio greater than 10% of the opening value in the quarter. In many cases this only encouraged knee-jerk responses during moments when calm heads were needed. It also created a distraction for DFMs, platforms, and advisers at critical times when their efforts and attention could be more usefully focussed elsewhere.”


Robert Vaudry, Managing Director of Copia Capital, is in agreement with Rendle that ‘sense has prevailed’ when it comes to the removal of the 10% drop rule requirement to inform investors of a fall of 10% in value of their investment as he comments:

“Most regulation tends to be erring on the side of the consumer, and rightly so. The 10% depreciation reporting rule was however an exception. At best these notifications were irrelevant, but at worst they risked panicking investors to move out of the market thereby crystallising their losses. I am pleased that sense has finally prevailed, and this rule is being removed.”


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