The role of Best Buys lists is being challenged following the suspension of the Woodford Equity Income fund, a prominent feature of the Hargreaves Lansdown Wealth 50 list until recently.
Ian Sayers, chief executive of the Association of Investment Companies (AIC), has called for a review of Best Buy lists that would scrutinise “how platforms select the funds that go on them and to what extent there might be commercial incentives to put one fund on the list and not others.”
Colin Clark, a Conservative MP and member of the Treasury select committee said in the Financial Times: “We would encourage the Financial Conduct Authority (FCA) to look at best buy lists in order to stamp out conflicts of interest which do not benefit fund managers or customers.”
According to FCA research, about a fifth of investors base their “preferred investment proposition” on a platform’s “best in class” list.
“The line between what is financial advice and what is not is a bit of a mess,” said Daniel Godfrey, former chief executive of the Investment Association (IA).
“Best buy lists are not regarded as advice, despite the fact customers probably think they have received advice when buying funds from one of these lists.”
What would investors do (without Best Buy lists?)
Best Buy lists have been a staple for amateur investors and professional investors.
Not only can they be found in UK national newspapers (largely on the weekend), but also on investment firms and platforms’ websites.
Boring Money CEO Holly Mackay says investors will suffer if these lists were no longer available to the mass market: “Confidence and trust have been rocked in these recommended fund lists. But the problem these lists were created to address has not gone away. Millions of customers are using these best buy lists to help inform their decisions. Simply suggesting that people use a financial adviser is not a practical solution – platforms clearly have work to do in how they select, monitor and communicate these lists more carefully as their relevance grows.”
Based on data provided by leading investment platforms, Boring Money estimates that that 31% of total DIY platform inflows were channelled to those funds on the ‘Best Buy’ recommended lists in 2018.
Further reading on this topic: