How I use investment companies: John Cornelius CFP, FFTA

Tax and Financial Consultant at Warwick Butchart.

John has over 40 years’ experience in tax and financial planning for individuals and trustees. He has previously been a manager for an international firm of chartered accountants, a director of local and national independent financial advisers and a divisional director of one of the UK's largest independent client investment managers. John's qualifications include being a Certified Financial Planner, and a Fellow of the Federation of Tax Advisers.

Warwick Butchart has in excess of £150m of funds under management and gives bespoke advisory management with some discretionary management outsourced. For portfolios in excess of £250,000 we often use DFMs.  Of this, approximately 20% is in investment trusts.

How do you use investment trusts?

We build bespoke portfolios for clients.  Firstly, we do the overall asset allocation.  Secondly, we select the most tax efficient wrappers and then thirdly, we start to research appropriate funds for our clients.  I often start looking at investment trusts first before open-ended funds because they have had better returns over the last forty years that I have been advising on them and in my experience, costs tend to be lower.  I like the protection that investment trusts give in falling markets because existing shareholders sell their holding on the stock market instead of redeeming to the manager (as with OEICs) and so the underlying portfolio remains intact.  This is important for my clients because they are investing for the medium and longer term.

Do you favour certain geographical regions when thinking about investment trusts for clients?

No, it is all driven from the asset allocation.

 

And what do you dislike?

Nothing really!  Sometimes I do find it quite hard sometimes to obtain client friendly information from trusts. I can get a set of reports and accounts but that’s often it!  More user friendly information like up-to-date factsheets would be helpful.

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

Advisers need continuing education.  I wonder whether there should be an investment trust exam in the suite of investment examinations.

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

First speak to Jacqueline Lockie or contact the AIC, and do some training to understand what they are and how they differ from open-ended funds.  Then, meet some managers.  You will then start to appreciate what they tell you because you understand the different dynamics of closed-ended funds.  Thirdly, be patient with the structure and leave it to deliver the returns to your clients over the medium and longer term.