RDR a 'game changer' for investments, says gold report

10 July 2012 | By Rob Langston

The implementation of the RDR “should be regarded as a game changer” for the investment industry, according to the World Gold Council, with the yellow metal set to benefit from the axing of commission for IFAs.

In it latest report ‘Gold as a strategic asset for UK investors’, the World Gold Council claims the current commission structure in the UK has narrowed the range of products recommended “which has been suboptimal for clients’ risk preferences and diversification prospects”.

The World Gold Council backs the new regulation, arguing that it will lead to a broader range of assets being recommended by advisers.

“Re-focusing the advisory community and the clients it serves on the importance of asset allocation decisions, not just product selection, sits at the heart of wealth protection.” it adds.

“Encouraging a broader approach to investing across a wider range of asset classes, based on an understanding of the long-term increase in cross correlations within global investment assets, will be a positive development.”

The World Gold Council claims the precious metal can serve a portfolio diversifier, preserver of wealth and a risk management vehicle.

“During most market crises over the last 25 years, gold has consistently increased portfolio gains or reduced its losses,” it reports.

Managing director of investment Marcus Grubb, says: “These extremely challenging times mean it’s impossible to quantify the risks for UK investors. They are facing an unprecedented combination of threats to their assets including extreme and unexpected market shocks that can trigger widespread value destruction.

“As UK investors reduce allocations to traditional investments such as equities and bonds and increasingly dash to cash, they face a double whammy, with the potential for stagnation of capital due to the lack of returns from cash and the increased possibility of inflation as a result of ongoing monetary stimulation.

“In this context, an urgent reappraisal of how to protect and create wealth is required and our latest research reinforces gold’s credentials as a core portfolio asset which reduces losses and preserves wealth.”

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Readers' comments (4)

  • Ian Wells | 10 Jul 2012 4:47 pm

    Physical gold ETF's have been around for a while and are just fine. Does RDR remove commission charged by bullion traders and storage fees?

    I have a different view about the prospects for gold. As more advisers elect to use a third party manager, rather than asset allocate and pick funds, there will be even fewer advisers recommending gold. This may be offset by more institutions buying gold on behalf of their new clients, but this is not a given. Discretionary managers tend to favour funds and if they do go a little off piste, a hedge fund seems to be a popular bet.

    Gold is merely sentiment, without the benefit of a dividend. There is a long term argument that gold has not kept pace with currency and this may ping back at some point, but to see RDR as a boost for gold is a little far fetched.

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  • Suhan Srinivasan | 10 Jul 2012 5:48 pm

    This does assume that the adviser does not believe that gold is in a bubble.

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  • Glen McKeown | 10 Jul 2012 6:38 pm

    It is interesting that a number of minority investment sectors, e.g investment trusts and gold, believe that a regulatory change will enhance the benefits of sectors that have not proved to be widely attractive in the past. If there were clear and substantial benefits in a sector there would be significant pressure on sales avenues, for that read advisers, to ensure that clients had access to those investments.
    In my career I had an occasional enquiry about gold and no more than that. On the basis of my own research I believe that gold is a bubble investment, and considered only at the top of its market. Holding gold is generally expensive, especially as it generates no income. It may work for some, but I would suggest that it is a specialist investment. As are investment trusts. I did make investments in both sectors.
    But the intriguing question is why RDR is being held out as the saviour of such specialist sectors. Either these sectors misrepresent the impact of RDR or RDR is so badly constructed that it creates totally false impressions and expectations. Can anyone really anticipate recommending an investment into gold for someone investing £50 a month into a pension policy?
    I know that people and organisations will use any excuse for getting publicity, but using a regulatory change for such publicity is likely to increase rather than decrease the level of confusion that will reign from January 2013. I can't see that this is raising any standards, so perhaps RDR is failing before it even starts.

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  • John Blackmore | 13 Jul 2012 3:50 pm

    Advisers naturally see things from their point of view. I wonder how investors will react to low cost multi-asset funds ( i.e including gold) bought direct from providers in a nil commission world ? and how many will be prepared to pay an additional 1% pa for advice and another 0.3% pa for wrap services

    RDR will indeed be a game changer but not necessarily in ways that some might wish.

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