Fewer retail funds could improve long-term investing

A new white paper from AXA Wealth reveals fewer fund choices could result in more private investment.

In the white paper, Wealth Management - from recession to recovery, published this week, experts suggest that the number of funds offered to private investors should be reduced as too much choice can be off-putting and result in them not investing at all.

In 2006 the pensions industry went through "simplification" to remove some of the barriers to consumers. AXA believes it is now time for the investment industry to do something similar.

The paper suggests that another barrier to investing is the lack of understanding of terminology and charging used by the financial services industry, and calls for a simpler approach and for clear, concise language to be used in place of jargon and acronyms.

These findings form part of the Wealth Management - from recession to recovery white paper, which includes a foreword by Andrew Clare, professor of asset management at Cass Business School in London. It explores the cyclical nature of recession and its impact on investors during periods of both downturn and recovery.

In the paper, investment experts from AXA Wealth and its multi manager business Architas, put forward their own recommendations for the investor community, based on a holy trinity of innovation, technology and regulation - values which lie at the core of AXA Wealth's own philosophy for a future generation of investors, and which will be key to its ongoing development of products and services.

Mike Kellard, chief executive officer, AXA Wealth, said: "One theme to emerge in our white paper is that for investors today, less is more. Too much fund choice can lead to people walking away from investing at all. Having a vast choice of funds holds no guarantee of making the right choice. The industry needs to respond to this and develop fund filtering technology to support investors' choices. History suggests that there can be up to 105 per cent difference between the best and worst European (excluding UK) funds, and 90 per cent difference between the best and worst performing funds in the UK All Companies fund sector, so getting your fund selection wrong can hurt.

"I believe the UK is poised for a period of significant transformation and growth. There is real potential for a continuation of the stock market bounce but we have to be ready. AXA Wealth will continue to pit its weight behind innovation and technology, which will benefit both consumers and industry professionals alike."

A selection of IFAs engaged by AXA Wealth for the white paper agreed that attitude to risk should be the primary consideration when building a portfolio. There was a consensus that for risk-averse investors, the UK looks positive for the long term, particularly in cash. However, for those able to take a riskier approach, the BRIC economies (Brazil, Russia, India and China), may be of interest.