At an investment seminar recently, attended by 30-40 advisors, I was shocked at the narrow focus being applied to investment structuring. For example, there is a distinct lack of knowledge about REITs, Infrastructure Funds and Exchange Traded Funds as well as Investment Trusts.
I mentioned the Discount* Protection Mechanism, which is becoming a popular strategy for investment managers. Hardly anyone knew what I was talking about. I even had to explain to the panel how it works. One question from the panel was: “Do you have to pay a premium to have the protection mechanism?” The answer is no. There is simply a clause written into the Articles that the managers will buy back shares if the discount increases above a certain level. For example, the managers of Finsbury Growth Trust & Income will buy back shares if the discount increases above 5%.
Investment trusts are clearly the financial advisor’s Achilles’ heal. If you would like a list of trusts that offer the Discount Protection Mechanism, I will be happy to supply one, and then you can put your adviser to the test and show your superior knowledge! Please just send me an email.
Meanwhile, at a recent meeting with a solicitor, having dealt with other matters, I made a fairly benign pitch for business. The response was: “You send us clients and we will send you clients.”
The inherent danger of this is obvious. If these same advisors comply, they will soon be advising the solicitor’s clients. With limited knowledge of such a diverse source of investment opportunity, how can they be advising clients in their best interests?
* Discount equals the difference between the net asset value of a trust and the share price, when the NAV is higher than the share price.