IFAs choose not to recommend investment trusts to their clients

AdvisorOver half (57%) of independent financial advisers (IFAs) are not recommending investment trusts to their clients, industry research finds.

Poor understanding and a general lack of access via platforms are key factors in discouraging IFAs from recommending investment trusts, according to research from the investment trust team at asset manager Henderson Global Investors.

Despite these barriers, over three-quarters (76%) of IFAs admit that they feel investment trusts are important investment vehicles for their clients because of their growth and income potential. However, one in five (18%) IFAs do not think the popularity of investment trusts will increase in the future because fund supermarkets make it too difficult for advisers to offer a full range of investment trusts.

The research also highlights that one in eight IFAs (12%) are not recommending investment trusts because they do not understand the products themselves, while 12% admit that they do not offer investment trusts to their clients simply because they only offer open product advice.

Gregor Johnston, chartered financial planner, Fitzallan Limited, says: “Investment trusts may not be the answer to every investment question, especially now that RDR [the retail distribution review] means they’re no longer necessarily the cheapest kids on the actively-managed block, but when an investment trust offers an attractive discount and low management charges, it frequently translates into excellent long-term value.”

At Henderson Global Investors, James de Sausmarez, director and head of investment trusts, says it is “alarming” that IFAs do not recommend investment trusts to their clients due to lack of understanding, adding that Henderson is developing content, including online videos, to help IFAs and retail investors gain a better understanding of the benefits of investment trusts.

Henderson Global Investors, wholly-owned by Henderson Group, manages £89.4 billion (€125.7 billion) of assets, as at March 31, 2015.

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