The next three months will decide the fate of the AITC's “its” campaign.
After several months of speculation over the campaign's future, last week's annual conference saw director general Daniel Godfrey lay down an ultimatum to the members.
In short, he implored them, unite and move forward together in a campaign extended for at least another four to five years or stop now and cut your losses.
Godfrey said: “If the AITC is to continue with a generic consumer and IFA advertising programme, the only way forward is to spread the cost more thinly by persuading members to come together and join in the future funding of a new medium-term generic programme.
“I am absolutely clear that we should not continue divided. Whatever the association does next year, we must all do it together.”
The task of asking his members for more money is by no means an unfamiliar or favourite one for Godfrey. In raising the original funds for the “its” campaign, he came up against persistent criticism and lack of enthusiasm from several members, many of which refused to contribute. As a result, just £25m of a planned £40m has been raised over the past two years.
The new proposal calls for an annual contribution of 0.015 per cent from each trust's assets. The fee, which would be added to the annual AITC membership levy, would cost the biggest trusts around £500,000 but the smallest as little as £5,000. Until now, the “its” campaign has been funded by discretionary donations.
Although the new levy sounds relatively insignificant, it would bring in a steady £10m or more a year – £2m more than was raised for this year's phase two of the “its” campaign. It might well reduce the contributions of the campaign's biggest backers but would see many others contributing to a consumer advertising campaign for the first time.
If Godfrey was unable to persuade a number of members to take part in a three-year project, it seems he may face a formidable task in getting members to stump up for another five years.
Witan is one of the few individual investment trusts to have its own separate marketing budget. Marketing manager James Budden says: “It does not seem a great deal when you talk of 1.5 basis points. But, in our own case, that would amount to £300,000 a year. We have a marketing budget of £1.25m so that would be around 25 per cent of our annual budget. In a lot of cases, it would be 100 per cent.
“I think there will be a lot of discussion and debate about these proposals. But essentially the AITC has done a lot of good and the 'its' campaign has definitely raised investment trusts' profile.”
Although Budden essentially supports the concept of the new levy, he believes several members may still refuse to take part. If this is the case, Godfrey will be faced with the choice of either excluding those members or backing down from the entire project.
Godfrey's plan B is to ask for just
one-third of a basis point each year to maintain the efforts of the AITC press office, internet sites and IFA services. But securing even this could prove to be a challenge.
Although Godfrey is in a tight situation, the tone of last week's conference may at least have provided some encouragement.
Questions from the floor to the panel at the end of the session centred much more on the practicalities of marketing to IFAs than the complexities of share buybacks, gearing or discounts. A presentation by Citywire founder Laurence Lever on how to handle and make optimum use of the media was also well received.
An explanation of the AITC-endorsed IFA admin service Transact showed there is a way of putting investment trusts on an even keel to unit trusts and other investment products in terms of commission.
Transact director Ian Taylor believes a slow change in attitudes means Godfrey has a good chance of getting his proposals through.
He says: “Daniel's proposals have landed on very fertile ground. I think the industry is starting to understand the importance of the IFA market and the importance of marketing in general.
“Ultimately, IFAs have a growing share of a growing market. Anyone who ignores that does so at their peril.”
Taylor points out that, in the short time Transact has been operating in the UK IFA market, 25 per cent of its business transactions have been into investment trusts. This compares with traditional levels of 2 or 3 per cent.
By providing IFAs with the option of taking both front-end and trail commission on investment trust products, Transact is taking the first steps towards closing the gap between investment trusts and unit trusts.
The complexity of investment trusts will make it difficult for them ever to become as mainstream as unit trusts. Many IFAs find their clients are put off by talk of discounts or gearing. But it would seem the investment trust market is still in for a sustained period of growth over the coming years, much of which will be led by the IFA community.
If Godfrey's proposals are rejected, the “its” campaign will be sent to an early grave. But to damn it completely would be hasty.
While much of the media has been cynical about the detail of the consumer advertising, as well as its effectiveness, the coverage which it has courted has had generally positive effects on the industry's profile. To stop the campaign now could well waste what ground has been made before any tangible results have begun to be felt.