But now commission has been removed as a hurdle, there is still no great use of trusts through the platforms that underpin most adviser business today. Mr Klonowski recalls, “About two years ago at an AIC seminar in Manchester, Annabel [Brodie-Smith] asked who used investment trusts, very few put their hands up. When she asked why, the first reason given was that ‘my platform doesn’t allow them’; the thought wasn’t ‘well, let me find a platform that does’.”
The lack of trusts on platforms seems like a distraction. Many successful established platforms have always offered them. As Mr Klonowski recalls, “When Transact came in, it was a joy to behold. They not only allowed investment trusts onto the platform, but actively encouraged them through a link with Morningstar.”
But, a decade and a half on from Transact’s launch, the three big platforms show little sign of developing their offerings to embrace closed-ended funds. A limited range is about to be made available through Fidelity FundsNetwork (along with some ETFs, another vehicle previously neglected by the platforms) but Cofunds and Old Mutual insist they have other, more pressing priorities.
“When RDR first started, what was interesting is the major platforms would say things like ‘we are looking at…’, ‘we are considering…’ There was nothing about ‘we should do this,’” says Mr Klonowski.
But this platform reticence might be motivated by a broad lack of demand. While investment trusts have enjoyed some growth, their market share is still dwarfed by the money tied up in unit trusts and Oeics. And the levels of inflows recorded do not suggest any reversal soon. There remains doubt as to whether there is an appetite among individuals for investment trusts, which are perceived as complicated for mainstream investors to understand.
Francis Klonowski identifies this, but dismisses the fear, “People are trotting out the same excuses. The one I read most often is ‘they are too complicated for my clients’. These would be people who might have been using with-profits bonds – you can’t get more obscure than that – and also probably using absolute return funds or structured products, and yet they say investment trusts are too complicated. Where’s the complication?”
When I suggest these advisers might actually mean that the vehicles are too complicated for them, Mr Klonowski is diplomatic, “Of course, but I was trying to avoid saying that.”
A lack of adviser knowledge is unforgiveable though, he argues. While applauding the AIC drive to educate the masses, he insists all the information required is all already there if you look for it.
