The terminology most often cited as problematic is not as confusing as it is depicted to be. What ‘gearing’ is and what ‘discounts’ means should not be beyond the grasp of a financial planner who spends their days dealing in various financial products underpinned by different convoluted mechanisms.
Sophisticated investors
The simple fact is there will be no significant upturn in investment trusts’ fortunes unless advisers start to recommend them. The target market should be sophisticated investors – advised clients in other words. These people are unlikely to be comfortable diving in themselves and need their advisers to understand the vehicles so they can recommend them appropriately.
But hopes of an increase in demand driven by clients are a long shot at best. As Mr Klonowski says, “It’s what we suggest to people that they are guided by.”
That is how it should be too, he says. He recalls sitting in on a telephone interview between a bank and client, when he heard the bank asking whether the client preferred active or passive: “I thought ‘He shouldn’t choose those things; it’s you that recommends them.’ It’s the same with investment trusts.”
In the entirety of Mr Klonowski’s client base he says there is one client who has always expressed a preference for investment trusts, “but they were connected with our business before I met them.”
Even the retirement freedoms and the seemingly perfect marriage of income-providing trusts and a retirement funding requirement has not motivated any enquiries. “That hasn’t made a difference, he says, adding, “They are still looking to me to suggest the best ways of populating the portfolio and if I suggest investment trusts and the reasons for them, they take that guidance.”
