Investors will win from RDR emphasis on IT

Alan is spot on..lets face it the excessive fees embedded in open ended funds and the associated commissions naturally encourage the growth in the sector..the sales incentives have made Hargreaves Lansdown a FTSE100 company!!

I'm not sure if this survey is a true "like-for-like" comparison. Are the UT figures income units with dividends (income) being reinvested, or without. Are they accumulation units? Much, very much, is constantly said about the real value of having income reinvested. The other point I would like to raise is the absence of any automatic reinvestment of dividends with IT funds. To do this currently involves the release of the dividend at a much later date than the payment date with all the costs involves allied to a minimum reinvestment amount.

Is there an IT company out who would like to make a groundbreaking move and introduction an "accumulation" like share?

If you think RDR is going to make a big change to ITs then I think you might be in for a surprise. With some exceptions their lack of liquidity makes them difficult to deal with,in my view they will stay a niche vehicle not a mass market one.

Investors wishing to make their own investment decisions may choose the IT route which is undobtedly cheaper, depending of course whether the fund is on a discount or premium to nav. If being advised to buy and sell IT's will the investor not be subject to a fee for such advice? If so where does this enter into your analysis? IT's are excellent vehicles for sophisticated investors playing the discount/premium game providing they do not wish to deal in significant size as in my experience buying large holdings moves the price up against you and selling has the opposite effect - where in your sums is this explained?

Presumably Mark Dampier (above) is one and the same as the Mark Dampier Head of Research at H-L. It seems to me that H-Ls business model and growth story is entirely based on the cosy relationship between them and the UT/OEIC fund managers that line H-Ls pockets with trail commissions paid out of the exorbitant AMCs that funds levy on retail investors. Even though the initial charge is rebated (mainly) it is extremely galling to have to pay such high TERs (1.5% to 2%+), a great deal of which is kicked back to HL when they do nothing to earn it in advice terms. Like many investors I self select everything.

I did call HL recently to seek advice (for which I was willing to pay for) on ITs and was told in no uncertain terms that HL does not have the resources to research and monitor this area. Absolute rubbish. They don't because it doesn't pay. Under their current business model H-L is absolutely not independent in terms of advice offered to clients. I tendered with them for a discretionary portfolio management service thinking that I would get a truly independent set of recommendations based on the best the market had to offer, given the 1% initial and 0.5% annual total portfolio fee. Instead I was recommended to place my money into one of their off the shelf HL multi manager funds, with quite mediocre performance and a high TER >2%. Needless to say I showed them the door.

It seems to me that carefully chosen ITs are an excellent way to diversify your portfolio with far more reasonable costs (on average 65bps less). Liquidity may be an issue at times but if you are investing for the long term you won't need to be frequently trading them, so for Mark Dampier to dismiss them as he has done above, in my view, is disingenuous. The RDR may well not make a big difference overnight, but with the requirement for absolute transparency on fees/ commissions the overwhelming advantage the likes of H-L have for solely backing OEIC/UTs will surely erode over time and that must surely be good for us private investors.