AIC updates platform comparison tables to help investment trust investors find best value

21 May 2024

The Association of Investment Companies (AIC) has updated the platform comparison tables on its website theaic.co.uk. The information is commissioned by the AIC from the lang cat, a platform consultancy.

Self-directed investors can access information on how to invest on a platform, including which platforms offer investment trusts and what accounts (such as ISAs, SIPPs and Junior ISAs) are available on those platforms. They can also compare platform costs at a glance or see a detailed breakdown of platform costs, as well as find out how to vote their shares or attend an AGM. A calendar of AGMs is also available on the site for investors to find out where and when meetings are happening.

Financial advisers can access similar information after creating a free adviser account on theaic.co.uk.

The update includes changes to the cost comparison 'heatmaps'. The heatmaps are intended to provide a simple view of how platform costs compare, so investors can see at a glance which platforms might be cheaper or more expensive in a particular scenario.

For example, the heatmap below compares annual platform costs for an ISA that is 100% invested in investment trusts.

Annual costs for an ISA that is 100% invested in investment trusts (retail platforms)

Source: theaic.co.uk/the lang cat. Based on 100% in investment trusts with four trades (buys or sells) a year. Investment is assumed to be within an ISA.

To see more heatmaps, covering a range of investment scenarios, visit the AIC website.

Nick Britton, Research Director of the Association of Investment Companies (AIC), said: "While the platform market is a competitive one, it isn't always easy to compare costs from one platform to another because of different charging structures. That's why we launched our platform tables, in partnership with the lang cat, to help investors and their advisers make quicker and easier comparisons.

"Cost is not the only factor investment trust investors need to consider. They should think about the level of service they require, which accounts they need, and even more fundamentally, whether it's possible to access all the trusts they want on the platform. We hope our platform comparison tables are useful to investors and advisers in making this important decision."

Nick Britton, Research Director at the Association of Investment Companies (AIC)

Steve Nelson, Insight Director of the lang cat, said: "When considering investment trusts in the context of platforms, there's a number of different aspects to think about and, ultimately, your answer will depend on individual circumstances. Price is the most obvious comparable and potentially the most difficult to get to the bottom of, given the myriad of structures and options out there. How much you have to invest, how many holdings you intend to have and how often you expect to trade (including regular, planned investments) all need to go into the mix. If you're particularly cost-conscious, there are considerable savings to be made.

"But price is just one factor. How much help and research you need with your choices, to what extent the platform will facilitate your voting rights and even simple availability (not all investment trusts are available on all platforms) are other factors that could need consideration too. Ultimately, choice is a good thing and reflective of a healthy market, but being as informed as possible can pay dividends."

The Association of Investment Companies (AIC) has collated comments from the three platforms with the largest shares of investment trust assets - Hargreaves Lansdown (6.9%), interactive investor (6.0%) and AJ Bell (2.3%)1 - on the importance of investment trusts to their customers and why investors should use their platform to hold investment trusts.

How important are investment trusts to your customers?

Emma Wall, Head of Investment Analysis and Research of Hargreaves Lansdown, said: "Very! We have seen investment trusts grow in popularity across all age cohorts. We have also seen an increasingly diverse number of sectors and providers feature in the monthly top ten most bought trusts, notably renewable energy trusts, private assets and infrastructure alongside the equity income stalwarts."

Laith Khalaf, Head of Investment Analysis of AJ Bell, said: "Investment trusts are a firm favourite with AJ Bell customers. The sector gives investors access to some great managers with the added bonus of being able to trade shares at any point in the day, and to pick up trusts trading at an attractive discount. The ability of trusts to smooth dividend payments by using their revenue reserve is an extremely appealing feature for those looking to generate income from their investments, especially those drawing down their SIPP in retirement. The closed-ended nature of investment trusts also allows investors to access more illiquid asset classes without the extra worry of fund gating, or managers holding high cash balances to meet redemptions. If investment trusts didn't exist, the market would have to invent them."

Kyle Caldwell, Funds and Investment Education Editor of interactive investor, said: "At interactive investor, we see customers attempt to bag themselves a bargain when an investment trust trades on an unusually wide discount in the hope that over time the share price will narrow towards the value of the underlying investments.

"However, the main trend we've seen over the past couple of years is investors focusing their sights on consistent dividend payers. Investment trusts are allowed to save some income for a rainy day, as they can retain 15% of income generated by their holdings each year. For our customers looking for a consistent income stream, these so-called revenue reserves are a key attraction."

Why should investors use your platform to hold investment trusts?

Kyle Caldwell, Funds and Investment Education Editor of interactive investor, said: "The interactive investor platform offers a wide range of investment trusts and uses a leading flat-fee charging structure. Our award-winning editorial team produces educational content that helps investors gain a broader understanding of investments and ii regularly interviews investment trust managers in its fund manager series and On The Money podcast.

"Facilitating shareholder engagement continues to be a top priority, and we have run a sustained educational campaign on this for some time. In fact, ii became the first platform to introduce voting on the app. We also switched from opt-in to opt-out voting in 2021."

Laith Khalaf, Head of Investment Analysis of AJ Bell, said: "The AJ Bell platform offers investors a low-cost way to hold investment trusts while enjoying all the bells and whistles of a market-leading platform, including a mobile app to monitor and trade holdings, and a wide range of tax wrappers and investment options. AJ Bell provides regular news and information to customers specifically on investment trusts, with plenty of articles in our weekly Shares magazine and a dedicated investment trust podcast. Our investment team also analyse the investment trust market to produce our Investment Trust Select List for investors looking for some help picking investment trusts."

Emma Wall, Head of Investment Analysis and Research of Hargreaves Lansdown, said: "Because investment trusts are brilliant! Specific to Hargreaves Lansdown, we've recently launched a new investment trust hub which showcases all our investment trust research, found easily from the megamenu at the top of the homepage. And of course, investment trusts are free to hold on the HL platform in the fund and share account, and costs are capped at £45 a year in the ISA."

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Notes to editors

1. Source: The ownership of investment companies (AIC/Argus Vickers).
2. The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC's vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 330 members and the industry has total assets of approximately £273 billion.
3. For more information about the AIC and investment trusts, visit the AIC's website.
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