European Union proposals on execution-only sharedealing contained in the Investment Services Directi...
European Union proposals on execution-only sharedealing contained in the Investment Services Directive (ISD) could damage SIPPs and self-select ISAs, Inter-Alliance says today.
Flexibility and cost-effectiveness of these products will suffer from the proposals, it adds.
One of the requirements of the ISD will be a full fact-find in order to establish the investor's risk profile before any transactions go through.
At the same time, stockbrokers will be held responsible for offering suitable guidance on all deals.
Inter-Alliance says the proposals would mean the end of execution-only trading, unless people are prepared twice the price.
As well as taking away clients' individual flexibility, the ISD could also substantially increase the costs of investing, as the expense of a fact find would add to the total expense ratio, Inter-Alliance says.
Effectively, this will not only have a massive impact on execution only sharedealing, but it will also affect SIPPs and self-select ISAs.
One of the key attractions of these is the flexibility and control over investment decisions that they offer clients.
An extra trading cost, imposed by this tougher suitability rules, would also make these products more expensive and thus less attractive.
"This sits totally at odds with the Government's attempts to get more people to take control of their finances, and to introduce a low cost financial services regime. The introduction of such rules would take away individual investor flexibility and be extremely costly for SIPP and Self Select ISA holders," says Charles Ansdell at Inter-Alliance.
"It would effectively remove the attractiveness of these products, which have proved extremely useful to sophisticated investors who wish to take more control of their investment decisions. It would effectively be punishing investors who take control and responsibility for their investments."
A key vote on the ISD is scheduled to take place on 12 June.
If the vote goes in favour of the changes, the new regulations will be implemented across all EU states within 18 months.
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