How I use investment companies: David Earl CFP FPFS

David started his business in 2002 with another adviser, but today it is a real family affair with both his son and wife working in the business. There are four members of staff in total working in the areas of administration, technical support and financials. David advises around fifty families in the South East.  Most are long standing clients, with some of twenty years plus, and he normally takes on three to five new clients each year. David manages just under £23m on an advisory basis, with Transact being the largest platform provider, and a sizeable proportion of the business being in closed-ended investment companies.

How do you use investment companies?

I use a core and satellite approach, with investment companies being used in the satellite part.  Investment companies are used more heavily in clients’ ‘adventurous’ portfolios.

What do you like about investment companies?

I am a believer that closed-ended funds do actually outperform open-ended funds.  Areas of market exposure such as infrastructure, which you cannot get anywhere else, offer me something different to include for clients if I choose.

Do you favour certain regions or sectors when thinking about investment companies for clients?

Infrastructure, physical property and smaller companies funds such as HICL Infrastructure, 3i Infrastructure, Graphite, Pantheon and F&C Smaller Companies.  In Europe and the UK, I like mid cap funds like the Schroder and JPMorgan investment companies for a long-term buy and hold.

And what do you dislike?

Poor liquidity. This is an important aspect and we need to be mindful of gearing including ZDPs. 

What could boards or the AIC do more to help advisers understand investment companies?

The AIC training is great.  Keep drip feeding information and training regularly so we don’t miss anything important.

Are there any tips or thoughts you could pass on to other advisers to help them understand or advise on investment companies more frequently?

Invest for themselves first.  Experiment with your own money, not your clients, as you will pay closer attention to how they behave.  When you are more comfortable with the different aspects, then start offering them to your clients. Also, make the effort to complete a specialist investment qualification such as the IMC.