Two years ago, I set out the Aitc's strategy for the revitalisation of the industry at a time when its imminent demise was being confidently predicted. Discounts had been up to 16 percent, and the press was full of stories of poor performance, poor governance or both.
The strategy established a new mission of working for value to shareholders.
Over the last two years, the industry has got off the floor and on to the front foot.
The Mori poll of personal finance journalists concluded: “The Aitc has made dramatic improvements to its image over the past two years and they are now placed ahead of the other eight industry bodies in terms of overall favourability and their press relations. Most journalists praise their campaign to improve the image of investment trusts.”
And the Metrica survey showed that the Aitc generated 1,327 articles last year. Furthermore, 94 per cent of that coverage was favourable and reached 87 per cent of our target audience.
This alone is a stunning outcome of the its campaign. Our Nop tracking survey showed that the advertising had been very effective in building awareness of the”its ” logo.
I do not want to over-claim about the restorative properties of the “its” campaign. We need to keep it up over the next few years. But we are on the right track. Discounts narrowed by over 5 per cent last year. That is worth over £4bn to shareholder value.
If the money spent on the “its” campaign counted for but a tiny fraction of that £4bn, then it has been well worthwhile.
And yet our tracking survey was not picking up the increases that we had hoped for in product awareness.
We had to analyse why this was. Was it that we only spent £17m against an original proposal of an optimum £27m? Or was it that we were over-ambitious in what we hoped to achieve in such a short space of time? Or was the advertising itself, while performing exceptionally well against certain objectives, not as effective across the board?
The conclusion of our research and analysis was that it was a combination of all three. Our research indicated that this was because it was just too attractive.
Many viewers were just sitting back and enjoying it. So, while the logo sank in, the educational messages that we were trying to convey were not assimilated to the degree we would have liked.
Of course, we wanted to use this learning to build on the successes of the first year. And we decided that we needed advertising with more of an edge. And in the face of general low interest and cynicism we decided that our approach should use humour.
If you can make people laugh they will suspend their disbelief long enough to assimilate the key points that we want to get across.
This is a very powerful tool for educating and it is in educating that we must succeed. If we can achieve this, then we will have succeeded in providing a fantastic platform from which you can promote your wares.
The key messages that we want to communicate are both short and simple.
That investment trusts have made a lot of money in the past. That they are companies that invest in other companies.
That they spread the risk. That they give you an expert to invest on your behalf. And that you can get them as an Isa. As we researched ways of communicating these messages, we struck on two key insights. Firstly, that people found the idea of inappropriate social behaviour to be potentially funny.
Secondly, that nearly everybody is deferring some financial decision.
And it makes them feel uneasy. So consumers reacted strongly to reminders about the need to stop deferring. And that is a very powerful advertising insight.
This is how the creative idea that we are using in our TV and press advertising was born. There are two creative ideas at play here. We have the idea of enlightenment, watching individuals at the very moment when the penny drops and they understand what an investment trust is.
Then we see the comedy n the ensuing rejection of what they are doing.
We have agreed targets that relate to a narrowing of the gap between unit trusts and ourselves. The measures cover a number of key responses in advertising awareness, product awareness, product understanding, consideration and preference.
We are confronted by wall-to-wall advertising. It is not easy to produce advertising that gets noticed, most will simply sink without trace, so all the signs are that we are on the right track.
And, it has to be said, something is happening out there. Last year, our retail sales nearly doubled. Discounts across the industry have narrowed considerably and the quantity and quality of press comment has improved beyond all recognition.
So where do we go from here? We should now consider a medium-term strategy of generic promotion. This would need to be combined with a commitment on the part of boards and managers to leverage off the generic marketing.
It is not an option to ask the existing funders of the its campaign to increase their contributions.
So, if the AITC is to continue with an advertising programme, all members will need to come together and join in the future funding of a new medium-term programme. I am absolutely clear that we should not continue divided. Whatever the association does next year, we must all do it together. The association should continue to develop the successes of the first stage, with a new programme for a medium term of at least four to five years before we seriously reconsider the strategy. We would, of course, continue constantly to review the execution.
If we do take this path, with the support of all members, the costs will fall considerably, both for those already funding the programme and for those who are presently outside when compared with the amount that they originally rejected.
When we have had the opportunity to review the outcome of this year's work, we will be in a position to determine which media to use and how much to allocate to each.
I envisage a structure based on two rates. This is because experience is showing that although companies with low discounts or an institutional mandate may need it less, their shareholders still benefit from a general narrowing of discounts. A top rate of not more than 1.5 basis points of gross assets for most members and one basis point for members with a clear institutional mandate.
So, for a £100m company the cost would be £15,000 per annum. The decisionmaking process from here will be as follows. Later this week, an executive summary will be sent to all boards inviting feedback on their views about the proposals.
In May, the marketing review committee will disseminate their views about the results of year two and performance in respect of our gap relative to unit trusts. We will also then take a view on the final proposed costs in the light of learning from this stage of the campaign.
In late July, the executive committee will meet to consider your responses. If, at that time, it seems clear that a very substantial majority of the membership, by size and by number are in favour of the proposals, I will recommend that we add a marketing levy to the basic mem- bership subscription.
Why is it my strong recommendation to the membership that we proceed on this basis rather than running up the flags and declaring victory?
Because building a brand takes a long time.
Because we will not otherwise achieve the levels of awareness that are needed to make the necessary breakthrough with consumers and IFAs.
Because there are tens of billions of pounds worth of stock to shift out of institutional hands.
Because thinking that we can solve our problems only by gradually chopping slices off ourselves via share buybacks is defeatist and no long-term solution.
Because we should not think that we can afford to advertise only when we are in crisis.
Because even 1.5 basis points is a very small absolute amount and a very small relative gamble against a discount on average 600 times larger.
Because, be in no doubt, the model is working even if it is more slowly than we would like. The sales figures, the PR and the discount all show it.
Two years ago, I came to this conference with a hugely ambitious programme for the future. In public affairs, in the establishment of resources for boards and in the promotion of the industry we had a daunting agenda.
Over the last two years, we have made progress in all these areas. I know we have had our failures but that is nothing to be ashamed of. The only way to make sure you never fail is never to do anything.
The really important thing is to make sure that you fail in a forward direction so that the lessons you learn take you one step closer to eventual success.