The fund house’s Annual Adviser Survey indicated that 80 per cent of advisers currently use ratings to help with their investment research. It also suggested that OBSR and FE Trustnet came out on top as the most popular ratings providers.
"The introduction of RDR has placed increasing pressure on advisers so I am not surprised they are looking more closely at tools such as ratings to help with fund selection," said Robin Stoakley, managing director at UK intermediary Schroders.
Adrian Lowcock, senior investment adviser at Bestinvest, says that while his company prefers to carry out its own fund research, he has seen the interest in fund and manager ratings increase.
"Where IFAs don’t have the research functionality or the resources of the larger wealth managers then I think ratings become a very important tool to whittle down the investment universe to a small number of decent funds," he said.
Chris Spear, managing director of Derbyshire-based IFA Spear Financial Services, says that tools such as the FE Fund Crown Ratings and FE Risk Scores are often the starting point when he is looking for a fund to fulfil a particular role in a portfolio.
"When market conditions change and I am going into an area I haven’t used for a while then fund ratings help to sign-post some of the best funds," he said.
The ratings are also important for providing peace of mind for smaller advisory firms that do not have direct access to managers to ask them important questions about the way they manage money.
"I began to get a little worried by the Standard Life Global Absolute Return Strategies fund as it has grown in size but the rating has helped to give me some reassurance that someone else is looking under the bonnet of the fund and I’ve stayed fully invested," added Spear. "The same is true of the Fidelity Moneybuilder Income fund."
Our data shows that the Standard Life GARS fund has an A-rating from OBSR while the Fidelity Moneybuilder Income fund has five crowns from FE Trustnet.
Performance of funds over 3-yrs
Source: FE Analytics
However Ben Willis, head of research at financial adviser Whitechurch, warns that fund ratings dismiss newer funds.
"We have a successful record of investing in newly launched funds that we feel have the potential to be highly rated funds of the future," he said. "Many of these are not eligible for a rating from most data providers because most specify that funds have a minimum track record of three years."
"We have backed a number of funds since launch which have since received the highest ratings from the various data agencies. The Newton Global Higher Income fund is just one such example."
The £2.1bn Newton Global Higher Income fund is managed by FE Alpha Managers James Harries and Robert Hay. It has five crowns in the FE Fund Crown Rating system and has returned 32.74 per cent over the last five years compared with 7.39 per cent from the average Global fund.