So what advice would you give to clients about Neil Woodford and Mark Barnett now that the new manager is finally in the driving seat for the Invesco Perpetual Income and High Income funds?
Presumably, there are almost as many views as advisers and indeed client circumstances. Some of you might say stick with things, particularly if the funds form a smallish proportion of a portfolio.
If a new client were to arrive at the door of your advice practice with, let’s say, half their money in the funds, then the advice might be different. It could lead to a suggestion that the client might certainly want to direct regular contributions elsewhere, but surely a broader diversified plan is likely to be the order of the day.
When the channel is the execution-only distribution channel, there may be only so much an intermediary can do. John LappinThe client might also ask the question: should I be following Neil Woodford when he launches his new funds at the group he’s joining, Oakley Capital? I will, once again, leave that to readers.
But the key characteristic is that this would all fall clearly into the advice category.
That is why advisers may take note of the fact that one execution-only firm – Willis Owen – issued its best sellers list for January to reveal that two of the five funds were still Income and High Income.
The firm says, among other things, they carried an interview with Mark Barnett in the client newsletter, which should have alerted people to the change.
It is interesting, however, that when the channel is the execution-only distribution channel, there may be only so much an intermediary can do. The funds may not be a ‘sell’, but they are hardly likely to be a ‘buy’ either – at least for the few months of the transition.
Amid all the debates about new channels, simplified or basic advice, whether the advice gap is growing or not and the rest, the Barnett funds offer an interesting test. The fact that an investment adviser can have a proper conversation about these funds and the transition is surely a huge boost for the case for full advice.
It doesn’t mean, certainly not in my opinion, that the execution-only channel should not be available. It is a matter of choice after all, and investors are almost always better off for having invested in the first place, so whoever helps trigger such decisions, it is generally a good thing.
It may, however, tell us something very interesting about investors. There are clearly many very different types of do-it-yourself investor. Some are no doubt very astute; some are very active reviewers of their funds; others are more than happy to invest in what they see as reliable funds and then for much of the time forget about them. Which sort of investor it is better to be may be a matter for debate, although it is interesting to see both Chelsea and Hargreaves Lansdown discussing the superior performance of their buy lists recently.
We also know that the boundary with full advice is probably quite fuzzy too, even in these days of supposedly all-encompassing solutions.
But the point about these Invesco Perpetual funds is that it may also show the limits of execution- only. Maybe the firms themselves recognise this. But do policymakers and regulators and, even more significantly, their investors?
John Lappin blogs about industry issues at www.themoneydebate.co.uk
