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Advised investors are still shunning investment trusts

Advisers continue to shun investment trusts as platform sales stall, a new report has found.

A Platforum survey shows less than a quarter of sole adviser firms recommend investment trusts, falling to 4 per cent for firms with between 51 and 100 regulated individuals.

In the study of 286 advisers, among the 36 per cent who recommend investment trusts, the holdings make up only 5 per cent of their portfolios. Advisers who recommend more investment trusts are also those who hold the most ETFs in portfolios as well as direct holdings and venture capital trusts and enterprise investment schemes.

Sales of investment trusts on adviser platforms as a percentage of total sales remain static despite strong performance of investment trusts against the FTSE All-Share index, Platforum finds.

Advisers say the lack of liquidity and an inability to hold investment trusts in model portfolios are the major barriers to entry.

On platforms, advisers say the lack of access to information on products – which often requires a fee – and the additional charges put them off.

Only 7IM and Ascentric, from May 2017, do not charge for investment trusts’ trading costs.

Some advisers also regard the inability to trade fractional shares on platforms as a barrier, in the same way that obstacles exist to fractional share trading of ETFs.

Thameside Financial Planning Tom Kean says he has not been convinced yet on why he should use investment trusts.

He says: “I don’t understand them very well and it’s not been very well communicated over the years. If they were that positive we’ll use them so there’s a problem.”



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. For Tom Kean, who is presumably an authorised adviser, to say that he does not understand investment trusts very well is disgraceful. They’ve been around for 150 years, so there’s no excuse for this. Investment trusts are a very low cost and transparent way of investing in equities or commercial property. Of course, we know that many advisers shunned them in the past because they did not pay commission, but that is irrelevant now.

    • John Blackmore 5th April 2017 at 9:35 pm

      How can any call themselves an Investment adviser and not understand investment trusts and just as importantly not recommend them is just amazing.

  2. Goodie goodie, more undervalued investments for my clients and easier excuses to convert new clients who have been sold only Open-ended vehicles…. Sad though, isn’t it!

  3. @ Philip Milton

    Sad rather understates it. A disgrace gets a little nearer. It really does show that that the great majority of (so called) advisers either know very little about investing or are too idle to offer anything other that model portfolios.

    You don’t have to add all the other stuff -VCT, EIS etc. And using the excuse of lack of liquidity merely confirms a breathtaking ignorance. Mainstream ITs invariably outperform open ended funds and also the comparable indices.

    But as Philip has so rightly said, it is a slam dunk for advisers like him who are in a great position to acquire clients who have only been fed OEICS.

  4. PS. Whatever happened to Roddy Cohn? One of the earliest acolytes of ITs.

  5. Just like VCTs are to a certain extend ‘shunned’ so to perhaps ITs given the fact that many more issues come into play when compared to open ended funds – most specifically the NAV vs. the Share Price and whilst many have premium / discount mechanisms explaining to a client an ‘investment fund’ has fallen because its (for example) manager or sector has fallen out of favour might be hard to comprehend for many investors when comparing to (for example) sector averages of open funds.

    Given the rise in passive investments (and these are a further step away from ‘market return) they are perhaps swimming against the popularist tide despite all of their attractions.

  6. Are Investment Trusts any cheaper than their OEIC peers now especially when you consider trading costs and spreads? How will this impact on the comparable performance in the future?
    Investment Trusts did not do particularly well compared to OEIC’s in the bear market of 2007 to 2009.

  7. It beggars belief that so called “Investment Advisers” shun ITs because they don’t understand them. Scottish Mortgage Trust is now a FTSE 100 constitutent, so for an adviser not to know that it is one of the best performing investments in the global stock market arena beggars belief. That’s not to mention it is available at .45% pa charge on HL. Ohh wait there’s no money in it for an IFA that doesn’t have the cahoonas to send his client a bill request.

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