Why post-RDR investment trust take-up not a done deal

Jane Wallace talks to David Barron, head of investment trusts at J.P. Morgan Asset Management, about the future growth prospects for the sector in the wake of RDR.

RDR will not boost investment trust distribution unless access to the funds through platforms is improved, according to David Barron at J.P. Morgan Asset Management.

If this issue is not addressed, any potential growth in the use of trusts will be held back, the head of investment trusts believes. “Open- ended funds have been on platforms for a long time,” Barron says.

“The arrangements with the providers are in place and payment systems are set up. The dealing is straightforward. With trusts, however, you are dealing through the market and with other parties such as stockbrokers. It does need some technological development. You can debate how much is necessary but it does require more work.”

Advisers also need more knowledge and a wider familiarity with the investment trust product for its usage to spread.

“RDR is a very significant step in the right direction as for many years the commercial playing field was not level. However, it won’t happen automatically,” Barron warns.

“The onus will be upon management groups individually and jointly to go out there and talk to advisers about trusts.”

Adviser research

JPMAM is aware of the issues faced by advisers when using trusts having recently published a paper on the subject called The Case for Consideration.

Proprietary research in the paper found that 28% of advisers surveyed did not use trusts because they felt their knowledge on the product needed refreshing.

The survey also revealed that 26% of advisers avoided trusts because they are not readily available on fund platforms while another 23% did so because there is no initial or trail commission built into their structure.

Barron says: “We’ve always taken the view that these were the three reasons why advisers didn’t use trusts as much as they might.

“RDR is addressing those reasons in a number of ways: removing commission from products, talking about adviser training and improving the consumer experience within the advice model, all of which is positive for investment trusts.”

But while removal of commission goes so far to help trusts, the knowledge gap and access problems remain.

The knowledge issue, Barron says, is “within our control” and is an area where management groups can intervene, either alone or in a joint project, perhaps through trade bodies such as the AIC.