The investment sector has welcomed the news that that cost disclosure requirements for investment trusts will be temporarily banned.

The announcement, by the Treasury and the Financial Conduct Authority yesterday (20 September), comes following years of investment companies calling for change.

These rules were inherited by the European Union (EU) and made it appear that investment trusts were more costly to put money into than they were.

This is because the disclosure rule requires trusts to publish the costs of financing, operating and maintaining real assets.

However, many of these costs are already published in regular company updates and reflected in the value of the share price for all investment companies.

This created a “double counting of costs”, which investment trusts have long been saying has put investors off.

Although £15bn of new money went into investment trusts in 2021 alone, it is estimated the double counting rule was seeing £7bn a year in income being lost.

The Treasury said it will lay out legislation to provide the FCA with the appropriate powers to deliver reform – the new Consumer Composite Investments (CCI) regime.

It said the new CCI regime will deliver more tailored and flexible rules to “address concerns across industry with current disclosure requirements, including for costs.”

The UK’s new retail disclosure regime is expected to be in place in the first half of 2025, subject to Parliamentary approval and following a consultation from the FCA.

The FCA intends to consult on proposed rules for the CCI regime this Autumn.

The Association of Investment Companies (AIC) chief executive Richard Stone described it as “great news”.

He said the AIC has lobbied tirelessly on the issue and praised the Labour government for “acting so swiftly”.

Stone added: “Investment companies are a great UK success story and have a vital role in bridging the gap between private assets and public markets.

“Ending misleading cost disclosures will enable us to continue delivering for investors and make a critical contribution to the economy as the government drives forward its ambitions for growth, investment and wealth creation.”

Abrdn head of closed-end funds Christian Pittard said: “We welcome this move by government and the FCA to address unfair and distortive rules that have crippled investment trusts.

“With the FCA confirming that it will not take supervisory or enforcement action if a fund chooses not to follow the cost disclosure requirements, all eyes will now be on data publishers at a time when what the industry and investors really need is consistency.”

Pittard also labelled the UK investment trust sector “one of the jewels in the crown of the financial services industry.

This announcement came following research from Abrdn that revealed London listed closed-end infrastructure investment companies are on track for their first ever three-year gap with no primary capital raised.

Abrdn blamed this on a higher interest rate environment and the cost disclosure rules, with 2023 and 2022 both being fallow years for primary fundraising.

AJ Bell interim investments managing director Ryan Hughes agreed that this news will be “warmly welcomed by both the investment trust industry and broader market participants”.

Hughes added: “Investment trusts play a hugely important role both in the financial services sector and the wider economy as a provider of capital and the unintended consequences of the current legislation created an unequal playing field that put investment trusts at a disadvantage and threatened, in some cases, their very existence.

“The removal of this unnecessary barrier will help the investment trusts sector regain its footing and allow them to compete equally against other investment structures, which will put them back on the radar for investors who have been reluctant to use them given the cost disclosure requirements.”

In the week before the Treasury and the FCA made this announcement,

In this Weekend Essay, Amanda Newman Smith shares a personal story highlighting the importance of excellent customer service, especially when dealing with vulnerable clients. She contrasts negative experiences with a paint company and a clock supplier against a positive resolution with NatWest bank when assisting her elderly mother. This episode underscores the significance of empathy, clear communication, and proactive problem-solving in building trust and loyalty.

I’ve always got a DIY project going on at home, so I’m a bit of a nerd when it comes to paint. There’s a textured paint that looks like stone, which I bought a while back to revamp my fireplace. This paint is fantastic, but pretty expensive. So when the company I ordered if from threw in the recommended natural bristle brush as a freebie, I was happy.

But when the paint arrived, there was no brush. Thinking it had been overlooked, I called the firm. I got through to one of the business owners who told me they’d run out. Fair enough, but it would have been nice to have been told. A simple ‘out of stock’ on the dispatch note would have done.

The free brush offer was also still listed on the website but when I pointed this out to the owner, she became defensive. This was just a small family-run business, I was told. The technology used to run the website couldn’t update these things automatically and they couldn’t afford an upgrade. They didn’t have the time to update these things manually either.

I love small businesses and I understand they don’t have it easy, but all this put me off as a customer. I tried to explain how this hadn’t created a good impression on me, a first-time customer, but it fell on deaf ears. I haven’t used this company since.

My experience with another small firm – an online business from which I’d ordered a glass clock – was so different. The owner had been let down on this by her European suppliers and was so apologetic and friendly that I was happy to wait for my order. I waited three months but in the end it needed to be cancelled due to the ongoing supply issues. I was disappointed, of course, but I was offered a discount on anything else I wanted from the website.

I mention those two contrasting experiences because of an experience I had recently while trying to help my mum with her banking. My mum is a younger pensioner and though still in the active retirement phase, she does have a few health issues that clip her wings. Like the hip pinning she had several years ago after slipping on some leaves. Walking long distances has got harder and she doesn’t drive.

When it comes to financial matters, the big problem is that my mum has never been comfortable talking on the phone about ‘official’ things. She gets nervous about what to say and doesn’t know how best to put things. And because she’s focusing on that, she doesn’t always take in what’s being said to her.

My dad used to deal with all that stuff and when he died, I started stepping in as I realised my mum needed a bit of help.

Requesting a new debit card for my mum from NatWest to replace one that had worn out should have been quick and easy. With mum and I both in the same room, GDPR should have been no problem to navigate. But everything about this call was painful and it took about 40 minutes.

My mum had lost her glasses and struggled when NatWest’s customer services agent insisted she read out her debit card number herself, as that was the required procedure. To tick that box, I had to read the number out to my mum, who then repeated it down the phone to the agent.

Then the agent discovered my mum’s phone number was out of date on the system and without that, she said there was nothing she could do. It was only when I asked whether the agent was aware of the Consumer Duty – to which I got no answer – and NatWest’s responsibilities towards vulnerable clients that we were passed to the over-60s helpline.

The agent there was brilliant but was still unable to send my mum a new debit card due to the out-of-date phone number. For that, mum was to visit a branch with some ID. It wasn’t ideal – the local branch has permanently closed and I’ve already explained mum’s difficulty with longer distances. Mum would potentially be left without access to cash because her debit card was unreliable. But at least we knew what to do.

When I got home, I decided to tell NatWest what had happened in an email. I was worried how my mum would have fared if she hadn’t had someone with financial services knowledge to speak up and get transferred to the over-60s helpline.

At this point, I have to give credit to NatWest. They swiftly apologised and started to investigate. Neil Wainwright, the firm’s customer protection manager, was amazing. He spoke to mum and me to get everything sorted without mum having to get to a physical branch. NatWest also gave mum some cash as a goodwill gesture and if we need anything else we just need to ask.

I told NatWest I was writing about our experience and asked for a response. A spokesman told me its staff are trained to recognise the differing needs of customers including vulnerabilities that may be present. “They have access to supportive guidance on how to help and can refer to the specialist teams we have available to support customers with more complex needs,” he said.

Customers can also tell the bank about any support they need through “Banking My Way”, a free service that can be used within its mobile app, online banking or by speaking to a member of staff.

But after listening back to our calls, NatWest acknowledged it let us down. “We had several opportunities throughout the discussion to give you both a better experience, including a missed opportunity to handover the call to Neil’s team,” the spokesman said. “As a result of your email we have arranged additional training to be given to the colleagues involved.”

All of us get it wrong sometimes – it’s the care and effort we take to put things right that really counts.

Ever since Labour stormed to victory in the general election, it has been making the case it has inherited a sluggish economy and a set of public finances in tatters.

Now, the latest GDP figures for the UK suggest the former isn’t strictly true, while the latter is arguably being used to lay the groundwork for potentially unpopular tax rises to be announced at the upcoming Budget in October in order to bolster those public finances.

Already Labour has tightened the belt with various allowances either being scrapped or put under consultation. This has led to much speculation about what could be next, with inheritance tax (IHT) being touted as one area ripe for raiding.

Removing this relief could raise £1.1bn in the current tax year, with this rising to £1.6bn by the end of the decade

In particular, some are suggesting business relief on AIM shares should be removed to help raise revenue. Currently, if you hold investments in qualifying AIM companies for at least two years before you pass away, the assets are passed on free of IHT.

The Institute for Fiscal Studies estimates removing this relief could raise £1.1bn in the current tax year, with this rising to £1.6bn by the end of the decade. Not a huge amount and won’t help too much in addressing the chancellor’s £22bn ‘black hole’ but sizeable nonetheless.

That said, in the lead up to the election and soon after, Labour made economic growth a priority. Given AIM’s bias towards UK small- and medium-sized growth companies, removing the IHT benefits would somewhat go against this.

Firstly, any changes would likely be consulted on, giving people time to shift strategies and move assets away from AIM and into other investments or vehicles for mitigating IHT.

Over the past 29 years, more than £135bn has been raised by over 4,000 companies on AIM

This would have the subsequent effect of dragging share prices of these growth companies lower and eroding value in the UK stock market – hardly a positive incentive at a time when UK capital markets are already under intense pressure.

AIM has been a fantastic proving ground for a number of companies and there are a number of success stories, despite recent performance struggles. Over the past 29 years, more than £135bn has been raised by over 4,000 companies on AIM. It may be home to small-caps, but it has been a mighty contributor to UK GDP growth, innovation and employment over the years.

You have companies such as Breedon Group, a construction company based in Leicestershire, which listed on AIM in 2010 before moving to the main market last year. There are household names, such as Jet2 and YouGov, which have flown the flag for AIM over the years. Meanwhile, we are seeing a spate of acquisitions of AIM companies as private equity and corporates recognise their value at what are fairly depressed levels.

Any removal of investor incentives could harm these companies providing popular and vital services but which remain at an early stage in their growth.

Quality companies, regardless of their size, have enduring characteristics

We are also at a juncture in markets where small-cap stocks have a great opportunity to outperform. Rate cuts are beginning to be implemented, inflation is seemingly under control and AIM is coming off a tough couple of years. The companies of the future need to be nurtured, and while not every company in AIM benefits from an IHT premium, the whole market will be hit indiscriminately as a result of any changes.

Given investing is for the long term, and business relief comes in after just two years, it reasons that a number of people are not invested in AIM solely for the purpose of mitigating an IHT bill. It is important the government remembers that when deciding its next steps.

For advisers and investors with exposure to AIM, the best thing to do right now is keep calm and carry on. AIM has its IHT benefits and these will not be taken away overnight, but careful planning will still be needed to mitigate the tax implications for clients.

Let’s hope the government agrees and gets behind its own growth agenda

Most importantly, though, investing in AIM should not be considered solely as an IHT play. It remains an exciting and intriguing investment opportunity, particularly for clients with longer time horizons, giving them access to quality and well known companies that have the potential to grow and perhaps join the main market one day.

Quality companies, regardless of their size, have enduring characteristics. AIM is home to a number of these companies, so it is important growth is not stifled but embraced. Let’s hope the government agrees and gets behind its own growth agenda.

Amisha Chohan is head of small-cap strategy at Quilter Cheviot