Although popular, risk-rated funds can present serious pitfalls for advisers. Bruce Moss, strategy director of eValue FE, takes a look at the compliance hazards.
Risk-rated funds are seen as a simple solution to the challenge of ensuring investment recommendations match customers’ risk profiles and continue to do so without the need for ongoing rebalancing. Their use enables the advice process to be straightforward and cost efficient – an important attribute post-Retail Distribution Review. All the adviser has to do is get a customer to answer a risk questionnaire, discuss the results with the customer and select the fund matching the agreed risk profile. What could be simpler? Sadly, quick and easy is all that can be said positively about the...
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