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What advisers are saying: Investment trusts – the talent’s in the choices

Invest some effort and trust the outcomes


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’ is, well, you guessed – defining it ain’t easy.

Yet when it comes to investment trusts, it is a lack of knowledge (57 per cent of advisers) and perceived complexity (36 per cent) that have discouraged advisers from using them. In other words, the inherent difficulty is both an opportunity and a sticking point.

One of the main advantages of investment trusts is that they can borrow money against the assets the portfolio owns. Hence ‘gearing’ can amplify both positive and negative returns (the latter when the fund manager gets it wrong). 

Dividend reserves are another advantage in an investment trust’s armoury and statistically, investment trusts are cheaper and produce better long-term performance than their Oeic or unit trust cousins. But only 29 per cent of advisers at a JP Morgan roadshow earlier this year said they currently used investment trusts and 26 per cent said they would not recommend them under any circumstances.

Encouragingly (on the face of it), 45 per cent said they would ‘look to use’ investment trusts in the next three years as availability on platforms improves. ‘Look to use’, however, is fairly non-committal 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, to put it bluntly, the choice not to become better informed – is the real issue at hand.

We all make choices every day. Some choices we make with purpose and some we make by not taking action, simply choosing to go with the status quo.

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

As the American author and entrepreneur Seth Godin 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.”

Bottom line: your life is the outcome of the choices you make. If you don’t like the outcomes you are currently experiencing, you need to make better choices.

Phil Wickenden is founder of So Here’s The Plan –  and @PhilWickenden

What advisers are saying-5Jun14



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