Having gauged numbers regarding advisers’ use of investment trusts and confidence in doing so, we turned our attention to the given reasons behind activity – or inactivity – in the market, shown in Charts 4-5. The open question of what advisers saw as the issues with investment trusts is illustrated in Chart 4.
Perhaps predictably, gearing, liquidity and availability through platforms were the most common answers. There is an argument that this unholy trinity have always been wheeled out by advisers who would not admit to the real reason for shunning the products – the lack of commission. A cynic might suggest these intermediaries are just struggling to break the habits formed under the old regime. In fairness, issues with transparency, client understanding and performance fees all got mentions too.
Some of the most interesting responses came from the ‘Other, please specify’ box that we made available for this question. Lack of FSCS protection was cited more than once, while one respondent saw the need for a good stockbroker as a potential barrier: “The need to appoint a stockbroker with good investment trust research capability on a limited mandate to manage holdings within asset allocations determined by us. This is necessary to maintain our independent status and not become accidentally restricted because we cannot conduct genuine whole of market research economically.”
Another reply said the involvement of a stockbroker made what should be simple transactions unnecessarily complex. Citing an example where she had wanted to transfer one client’s funds between two investment trusts, both held with Henderson, one adviser said on contacting the firm she was told the transfer would require a stockbroker. This related to a holding of about £15,000 and for this, not untypical amount, “the costs outweigh the advantages of staying in investment trusts”.
The same adviser also raised the vehicles’ comparatively high risk rating which, she said, “kicks them out of the playing field for many.”
We asked what had driven use of the vehicles, and the answers are shown in Chart 5. The most popular of our given answers, just, was a belief that the products would provide the best returns. Only 21 per cent said they had increased use of investment trusts purely for compliance reasons.
Again some of the open responses were interesting. One mentioned an increased availability on platforms, news of which clearly hadn’t filtered through to the respondents in Chart 4.
Finally we asked, perhaps optimistically, whether clients had become more or less likely to ask about investment trusts. The responses leaned slightly towards ‘more likely’ but a huge majority of 84 per cent reported no difference.
