New research from Legal and General Investments suggests that IFAs select investment funds based on fund manager, fund cost and fund house.
A quarter of those advisers asked by the survey said that the name behind the fund was the most important thing when it comes to their own investments.
The fund manager was the most important factor for IFAs picking a fund, followed by fund fees and charges, and an investment provider with which they felt comfortable.
Only 45% of IFAs agreed that the level of commission paid was not important at all.
With less than 18 months to go until the introduction of the Retail Distribution Review, it is worrying that over half of those advisers surveyed still consider the level of commission to be important when selecting a fund.
Fewer than one in twenty rated choosing the best selling asset class as very important.
Here at Informed Choice, we go beyond the three Fs of fund manager, fund cost and fund house when selecting funds to recommend to our clients.
Our fund selection process aims to identify funds that demonstrate consistent risk managed returns combined with a low total expense ratio.
Funds from the entire universe of collective investment funds which display these attributes are favoured by our fund selection process, with the name of the fund manager or fund house considered as part of an additional layer of qualitative research much later in the process.
Naturally our investment advice is driven by asset allocation decisions, rather than fund selection.
All investors should understand how their advisers select the investment funds they recommend.
If an IFA does not have a documented investment advice and fund selection process, there is a real danger they are counting on little more than a high profile name when picking their funds.
Photo credit: Flickr/Images_of_Money
