Klonowski & Co, Leeds.
Francis set up his own financial planning business eighteen years ago after working as an IFA in a small IFA firm in Leeds for five years. He manages approximately £14.3m split 40% advisory and 60% discretionary with the discretionary parts outsourced.
How much of your business is in closed-ended investments?
About 80% of the advisory business is in investment trusts only. I do not use other closed-ended investment companies in clients’ portfolios.
How do you use investment trusts?
They are my first choice after establishing a client’s risk profile and returns needed from their portfolio to ensure their objectives are met.
Do you use model portfolios?
We make use of Cormorant run by Steve Williams. He does the fund research and breakdown of open-ended, closed-ended and passive funds. We also use Morningstar to back up this research.
What do you like about investment companies?
I like the fact that they are viewed as more specialised investments. When I started reading and researching them twenty years’ ago they certainly seemed more specialist and I thought that would be a good way for me to differentiate myself from the mass of advisers, by understanding and offering something different to clients. They have a long history and tradition, longer than the open-ended world. I also like that you rarely come across ‘star’ fund managers managing money which helps reduce excitement and resulting large flows of money both in and out. I also like that they don’t waste money unnecessarily in inviting me to wine evenings and jollies as the open-ended world tends to do.
How do you use investment trusts when giving advice to clients and do you favour certain geographical regions when thinking about them for clients?
No, not specifically as it all comes from the risk profile and asset allocation required for that particular client.
And what do you dislike?
Nothing. I thought that the closed-ended fund industry managed the splits problems well and has come through it successfully.
What could boards or the AIC do more to help advisers understand investment trusts?
I think that boards could do more to help dispel the common myths surrounding investment trusts and hence aid understanding for more advisers. Things like gearing and liquidity – they could easily explain how these issues might impact their fund along with the require risks and dangers but also give some perspective so that advisers don’t read it all negatively.
I think the AIC does much more than the boards do in this area offering more information and training than ever before. The AIC has done much more than the equivalent bodies in the open-ended world!
Are there any tips or thoughts you could pass on to other advisers to help them understand or advise on this area more frequently?
Yes, I think all advisers should start the year setting out time and CPD requirements in their programs to improve their knowledge in this area. Start with the information on the AIC website, then continue with reading specialist publications and then finally they can re-assess their position and investment proposition.