This notice cannot disclose all the risks associated with the products we make available to you. You should not invest in or deal in any financial product unless you understand its nature and the extent of your exposure to risk. You should also be satisfied that it is suitable for you in the light of your circumstances and financial position. Different investment products have varied levels of exposure to risks and to different combinations of risks.
Products we offer
ISA tax rules can change and their benefits depend on your circumstances.
SIPPs are not suitable for everyone. If you don’t want to invest across different asset classes or don’t think you will make use of the investment choices that SIPPs give you, then a SIPP might not be right for you.
All investments involve a degree of risk of some kind. This section describes some of the risks which could be relevant to the services we provide to you. We may provide further risk information during the course of our services to you, as appropriate.
Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets outside our control. Investments and the income from them may go down as well as up and you may get back less than the amount you invested. Past performance is not a guide to future performance.
We aim to provide investors with information to help them make their own investment decisions although this should not be construed as advice or an investment recommendation to buy, hold or sell. No view is given as to the present or future value or price of any investment, and investors should form their own view in relation to any proposed investment. If you are unsure about the suitability of an investment or if you need advice on your specific requirements, we strongly suggest that you consider professional financial advice.
Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives.
Collective Investment Schemes (commonly known as ‘funds’)
A fund is a term that covers different types of structure, normally Open Ended Investment Companies (‘OEICs’ - by far the most common) or Unit Trusts. You will generally not be given a choice as to the structure of a particular fund, as each fund will already have its own preferred structure. Most funds can be held in tax-efficient wrappers, such as ISAs and pensions. Funds are arrangements that enable a number of investors to 'pool' their money, in order to gain access to professional fund managers. Investments held by these funds may typically include gilts, bonds and quoted equities, but depending on the type of scheme, may hold higher risk instruments such as property, derivatives, unquoted securities and other complex products. The value of a fund, and the income derived from it, can decrease as well as increase and you may not necessarily get back the amount you originally invested. In addition, funds bear investment management risks, insolvency risks and possibly liquidity risks (see below). You should ensure that you understand the nature of any fund before you invest in it. You can do this by making sure you read the Key Investor Information Document (which is made available to you for each fund) for a summary of the main risks. Some of the more common risk factors are detailed below in the ‘Sector/asset-specific risks’ sections.
Investment trusts are similar to funds in that they provide a means of pooling your money but they are publicly listed companies whose shares are traded on the London Stock Exchange. The price of their shares will fluctuate according to investor demand and changes in the value of their underlying assets. They will be subject to a combination of the risks associated with shares, bonds and funds in which they are invested. The value of investment trusts, or the income derived from them, can decrease as well as increase and you may not necessarily get back the amount you invested.
This section lists some common risk factors relating to the geographical area, industry and/or asset type applicable to a particular investment product, particularly funds.
- Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing.
- Targeted Absolute Return funds do not guarantee a positive return and you could get back less than you invested much like any other investment. Additionally, the underlying assets of these funds generally use complex hedging techniques through the use of derivative products.
- Smaller companies’ shares can be more volatile and less liquid than larger company shares, so smaller companies funds can carry more risk.
- Underlying investments in emerging markets are generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment’s value could either increase or decrease in response to changes in those exchange rates. These investments therefore carry more risk.
- Funds which invest in a specific sector may carry more risk than those spread across a number of different sectors. In particular, gold, commodity, technology and other similarly-focused funds can suffer as the underlying stocks can be more volatile and less liquid.
- Due to their nature, specialist funds can be subject to specific sector risks. Investors should ensure they read all relevant information in order to understand the nature of such investments and the specific risks involved.
- The property market can be illiquid; consequently, there can be times when investors in property funds will be unable to sell their holdings. Property valuations are subjective and a matter of judgement.
Shares carry varying risks brought about by the performance of world markets, interest rates, taxes on income and capital, foreign exchange rates, liquidity (the ease with which a security can be traded on the market) and the financial performance of the issuing companies. The value of, or income from shares can go down as well as up and you may not get back the original amount you invested. Shares purchased on the Alternative Investment Market (AIM) and PLUS market (especially those known as ‘penny shares’) carry a higher degree of risk of losing money than other UK shares. This is because the requirements on companies that are listed on AIM and PLUS markets are less stringent than those for companies with a full market listing. There is also usually a wider spread between the buying price and the selling price of these shares and if they have to be sold immediately, you may get back less than you paid for them due to a lack of liquidity. The price of these shares may change quickly and they may go down as well as up. It may also be difficult to obtain reliable information about their value or the extent of the risks to which they are exposed.
Exchange Traded Funds (ETFs)
ETFs are investment funds, traded like shares which hold assets such as shares, commodities or bonds. They normally closely track the performance of a financial index, and as such, their value can go down as well as up and you may get back less than you originally invested. Some ETFs rely on complex investment techniques, or hold riskier underlying assets, to achieve their objectives and therefore you should always ensure you read the documentation provided to ensure you fully understand before you invest the risks you are taking on.
Bonds are loans to a government or company. They are also known as debt investments, and cover the categories of Debt Securities and Fixed Income Investments. Generally, they will be more stable than share-based investments but in some circumstances (particularly when interest rates are changing) they can be more volatile. Bonds issued by major governments and companies are generally more stable than those issued by emerging markets or corporate issuers, and in the event of an issuer experiencing financial difficulty there may be a risk to some or all of the capital invested. Any historical or current yields quoted should not be considered reliable indicators of future performance.
Some products (such as Hedge Funds, Structured Products, Warrants and Venture Capital Trusts) are defined as complex. There is no single definition for complex products but products that fit into this category are generally those where:
- there is an actual or potential liability greater than the amount invested for the client; or
- the product is a derivative or has derivatives embedded in it; or
- there are limited opportunities to sell the product; or
- adequate comprehensive information is not generally available on the product.
These types of products carry additional risks to those described above for the other categories of investments and you must note the additional risk warnings that accompany these products. In some cases this category of investment may not be offered to some investors without undertaking further enquiries.
Certain investments are deemed to be non-mainstream collective investments (these include unregulated collective investment schemes, some special purpose vehicles and other complex investments) and are not subject to the same regulatory protections as other investments. It is Evelyn Partners policy not to facilitate or advise on trades in such investments.
Investments denominated in a currency other than sterling or ones that undertake transactions on foreign markets, which include the financial markets of developing countries (Emerging Markets), may expose you to greater risks caused by fluctuations in foreign exchange rates. This can adversely affect the value of your return and the value of your investment. Investments in emerging markets are exposed to additional risks, including accelerated inflation, exchange rate fluctuations, adverse repatriation laws and fiscal measures, and macroeconomic and political factors.
Investment manager risks
This is the risk of loss from the poor performance of the fund managers in your portfolio as well as by us in the management of your managed or advised portfolio.
There may be difficulty in selling an investment caused by a number of factors, including but not limited to insolvency of the investment, adverse stock market conditions, selling restrictions placed on funds by their managers (sometimes referred to as gating, lockups, notice periods or suspension of redemptions). In these circumstances you may not be able to sell such investments in a timely manner and the value of those investments may fall significantly.
Stabilisation/Initial public offerings (IPOs)/New issues
When securities are newly issued, the market price is sometimes artificially maintained by the issuer during the period when a new issue is to be sold to the public. This is known as stabilisation and may affect not only the price of the new issue but also the price of other securities relating to it. Stabilisation is allowed, as long as a strict set of rules is followed, in order to counter the prospect of a drop in price before buyers can be found. The overall effect of this process may be to keep the price at a higher level than it would otherwise be during the period of stabilisation.
Suspensions of trading
Under certain trading conditions it may be difficult or impossible to liquidate a position. This may occur, for example, at times of rapid price movement if the price rises or falls in one trading session to such an extent that under the rules of the relevant exchange trading is suspended or restricted.
Clearing house protections
On many exchanges, the settlement of a transaction is ‘guaranteed’ by the exchange or clearing house. However, this guarantee may not protect you if your investment manager or another party defaults on its obligations to the exchange.
Your investment manager’s insolvency or default, or that of any other brokers involved with your transaction, may lead to positions being liquidated or closed out without your consent. In certain circumstances, you may not get back the actual assets which you lodged as collateral and you may have to accept any available payments in cash. On request, your investment manager must provide an explanation of the extent to which it will accept liability for any insolvency of, or default by, other firms involved with your transactions.
Self-directed investment (execution-only services)
Self-directed investment, where investors make their own investment decisions and transactions are made on an execution-only basis, is not for everybody. Investors who choose to invest in this manner should regularly review their portfolio, or seek professional advice, to ensure that the underlying assets remain in line with their investment objectives. This can be particularly important for those investing towards a defined time horizon – for example, those investing for retirement via a pension.
This list is not intended to be fully inclusive of all relevant risks; we would strongly encourage you to ensure that you have read all relevant literature, and that you are comfortable that you understand all of the associated risks relating to an investment, before you decide whether or not to purchase it. Should you be in any doubt as to the risks involved, or to the suitability of a particular investment, you should seek professional financial advice
Non-Independent Research Disclosure
Any information which could be construed as “investment research” has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.
The material provided on our website is not an offer to buy or sell any of the stocks mentioned. Bestinvest accepts no responsibility for any use made of these comments and for any consequences that may result. We cannot guarantee the accuracy or completeness of the information provided and consideration has not been given to the personal circumstances of any investor. Therefore any person acting on it does so entirely at their own risk and must assess the suitability of any investment for their own personal circumstances and individual investment objectives. It is not a personal recommendation.
Although we are not specifically constrained from dealing ahead of any material we do not seek to take advantage of it before it is provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients.