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Phil Wickenden: Are advisers neglecting investment trusts?

Last week, I looked at how the proven way to add value is to do extremely difficult work well. That seems obvious, right? If you do something that is valued but scarce because it is difficult, you are more likely to be in demand and to be compensated fairly for what you do.

The only thing about difficult work is that – you guessed it – it is not easy.

Yet it is a lack of knowledge and perceived complexity that have discouraged many advisers from using investment trusts to date: 57 per cent and 36 per cent respectively, to be precise.

In other words, the difficulty is both the opportunity and the sticking point. As it so often is.

One of the main advantages of investment trusts is that they can borrow money against the assets the portfolio owns. This gearing can amplify both positive and negative returns.

Dividend reserves are another advantage in their armoury. Indeed, statistically, investment trusts are cheaper and produce better long-term performance than their open-ended cousins.

That said, only 29 per cent of advisers admitted they routinely consider them where appropriate, while 26 per cent said they would not recommend them under any circumstances.

Perhaps encouragingly, 45 per cent said they would look to use investment trusts in the next three years as availability on platforms improves.

But “look to use” is as pretty non-committal as it gets, and I would wager platform availability alone will do little to improve the level of engagement without a bit of elbow grease. The lack of understanding, or the choice not to become better informed, is the real issue at hand.

Because it is a choice. We all make choices every day. Some choices we make with purpose and some we make by not taking action; simply by choosing to go with the status quo.

Habits are a choice. Work is a choice. Reputation is a choice.

Someone clever once said: “No one can be responsible for where or how we each begin.

“What we choose to do next, though – how to spend our resources or attention or effort – this is what defines us.”

The bottom line is this: your life is the outcome of the choices you make.

If you do not like or question the outcomes you are currently experiencing, make better choices.

Phil Wickenden is managing director at Cicero Research

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Spot on Phil.

    Investment Trusts provide a growing income, some for 51 years. Difficult to understand, yes? This is where IFAs (should) add value, by doing the research.

  2. Spot on Phil. This is where IFAs can add real value, IT’s that have given an increasing income year on year over 51 years.

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