Fund purchase lists ‘potentially misleading’, says watchdog

Fund suggestions promoted by Hargreaves Lansdown, Fidelity and Bestinvest are beneath scrutiny


The fund recommendation lists utilized by hundreds of thousands of investors are “potentially misleading”, regulators have said.

These lists are primarily fund ideas, but are dressed up in a different way. They are normally labelled “favourite funds” because brokers are not permitted to give fiscal guidance.

Usually the funds are promoted heavily, with consumers bombarded with data from the broker.

“Purchase lists” have grown in prominence in excess of the past couple of many years and the majority of fund outlets have their very own edition, this kind of as the Hargreaves Lansdown Wealth 150, Fidelity Pick Listing, Bestinvest Premier Selection and Charles Stanley Direct Foundation.

The Economic Carry out Authority mentioned traders risked choosing money on the incorrect basis if the broker failed to outline why it favoured specific funds.

A spokesman for the FCA explained: “One of the principal approaches in which some firms sought to help customer investment variety was by means of undertaking their personal study on the investments accessible by way of their support and then publishing the findings. For instance, by producing ‘best buy’ lists of likely merchandise.”

“Where firms make this variety of study for their customers, they ought to take account of the info their customers will need to understand this component of their service and make sure it is communicated to them in a way that is fair, clear and not misleading.

“Where companies do not make this clear, there is an increased chance of customers selecting their investments on an uninformed and probably misleading basis.”

The regulator extra that the vast majority of broker companies it visited mentioned investors viewed the “buy lists” as a valuable assist as part of their analysis approach.

Its findings, component of a review into these sorts of solutions, have been made after visits to key brokers to assess whether or not traders created their personal investment alternatives independently.

What must investors do?

The best strategy is to use fund recommendation lists as a starting point when studying funds. Even Hargreaves Lansdown says the funds on its list – referred to as the Wealth 150 – are not automatically all “buys”. Alternatively, it says, it is simply a checklist of its favored money in the main sectors.

Patrick Connolly, a monetary adviser at Chase de Vere, mentioned investors required to tread careful and see the lists with a dose of healthier scepticism.

“A lot of investors will consider that when they are sent particulars of recommended funds, they are acquiring advice. Nonetheless, discount brokers aren’t held to account for the functionality of their recommendations and take no responsibility if traders purchase these money and they execute badly,” mentioned Mr Connolly.

“But investors have no notion what influences are behind these suggestions. Have the funds been extensively researched and are regarded as to be ideal in breed or have business arrangements played a considerable portion in determining what funds are recommended?”

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