In the post-RDR world, requirements for advisers to consider all asset classes and to potentially use more than one investment platform in theory was meant to level the playing field for vehicles such as investment trusts.
Almost 18 months after the introduction of the RDR, the three biggest platforms still do not offer investment trusts, but that’s not to say sales of investment trusts on platforms overall haven’t seen a boost.
Figures from the Matrix Solutions Q1 2014 report Demand for Investment Companies via Platforms show that sales through platforms have steadily increased, reaching in excess of £328m in 2013, an increase of 67 per cent from 2012.
But with the explosion of direct-to-consumer (D2C) platforms, alongside more wealth managers bringing their offerings to market, it can be difficult to say whether the boost in sales is coming through adviser-focused platforms or D2C.
Anecdotal evidence from investment trust providers such as Henderson and F&C suggests the biggest surge in sales is coming from D2C contenders, such as Hargreaves Lansdown, although Simon Cordery – head of investor relations and business development, investment trusts at F&C Investments – notes it can be difficult to identify the business that comes through adviser leads.
“Since we entered the brave new world of the RDR, we have seen an increase in investment trusts across platforms. Two things that have been very obvious are that in the early months of the RDR the initial move was within the D2C platforms. We saw Hargreaves Lansdown, in particular, shooting up the share registers in that first 12-month period, along with the likes of Alliance Trust, Barclays Stockbrokers and TD Waterhouse.
“Then towards the end of last year and the start of this year we started to see a bit more activity in platforms such as AJ Bell and Standard Life Wrap, so it was starting to become a little bit easier to identify some activity from the adviser platforms. That also coincided anecdotally with requests for more investment trust training from advisers across the country.”
But he warns that, while there has been an increase in sales, “I wouldn’t say it is in life-changing quantities. Although the change in numbers looks quite big, the scale of the numbers themselves is still dwarfed by the open-ended side of things.”
Simon White, managing director of BlackRock investment trusts, agrees that adviser demand on platforms is growing rapidly “but from a low base and so far remains relatively modest in absolute terms, certainly relative to open-ended fund flows”.
He adds that while over time it could become a more significant trend, the more interesting development has been the increase in self-directed investments, as highlighted by the rapid growth of assets under administration at Hargreaves Lansdown and other online brokers.
“Model portfolios are also playing an important role in private investor fund selection, both those created by the online brokers themselves and those set up and promoted through personal monthly finance magazines,” he adds.
Melissa Gallagher, head of investment trusts at Allianz Global Investors, says they take a two-pronged approach to reach potential investors, talking to both the traditional buyers of investment trusts, such as wealth managers and stockbrokers, as well as directly to private investors.
She explains: “During the past two years or so there has been a revolution in the way these investors are able to buy shares, as they are no longer required to pay commissions to stockbrokers or financial advisers. This freedom empowers investors to undertake their own research and then transact through the most cost-effective platform online.
“The percentage of shares held via execution-only platforms, the majority of which are D2C platforms, has increased 160 per cent for the RCM Technology Trust, 180 per cent for the Brunner Investment Trust and almost 60 per cent for the Merchants Trust over the past two years. Although there has been a small increase in the number of shares held via adviser platforms over the same period, it is the D2C platforms where we believe there is real growth.”
But Mr Cordery points out there are some advisers that use D2C platforms to buy investment trusts for clients, suggesting the data is not as clear cut as it might seem.
Nyree Stewart is features editor at Investment Adviser
