Fund seminars for all – education or inducement?

Financial education is a cause to which all have rallied. Who does not wish to see the public better informed about markets and investment and able to make choices best suited to their risk appetite and circumstances?

An effective means of education was through conferences and seminars that helped to explain the multitude of mutual funds and investment trusts on offer – what they did, how they operated, their performance record and the view of fund managers on the state of markets.

There used to be quite a number of those held across Edinburgh and Scotland for private investors. But then along came the EU’S MIFID2 – the Markets in Financial Instruments Directive. This was widened earlier this year with new product governance requirements for manufacturers and distributors of financial products under the laudable guise of strengthening investor protection.

The effect of MIFID2 has been to restrict such conferences and seminars to existing clients of the firm lest they were seen to be offering inducements to trade – this could be anything from free entry to a notebook and Biro – even a hotel machine coffee and tired sausage roll for the fortunate.

Doubtless there were rogue financial advisers who treated these conferences as a sales pitch worthy of used car salesmen. But I have attended hundreds of investor conferences and the vast majority comprised straightforward talks on funds and investment trusts with little discernible sales spin. Indeed, it can fairly be said that not every fund manager had the gift of inspiring oratory to hold audiences to the bitter end of a 30-plus Powerpoint slide show on the vagaries of a Taiwanese smaller companies technology trust. Could even the wilting sausage rolls be classified as an inducement? Only in your worst nightmares.

For those of a legal mindset, there may indeed be the finest of lines between financial education and “inducement”. But if fund managers are restricted in the audience to existing clients and advisers in order to explain their funds, how is the broader retail public to be educated? How can we collectively moan about the lack of financial market education yet restrict the flow of information to the already knowledgeable? Investment trusts, which are not allowed to advertise in the same way as mutual funds, find themselves under a double disadvantage.

Now and again, common sense breaks through. Last week I was invited to a seminar in Edinburgh organised by Winterflood Investment Trusts. This brought together under the chairmanship of Winterflood investment trust expert Simon Elliott presentations from five investment trust rivals – Ben Lofthouse of Henderson International Income, Omar Negyal of JP Morgan Global Emerging Markets Income, Mike Schozer of Hadrian’s Wall Capital, Walter Price of Allianz Technology Trust and Alastair Mundy of Investec Asset Management who manages Temple Bar Investment Trust. All five were professional and informative presentations, providing insights into the investment methodology of the trusts, their stock selection process and both recent and long-term performance. Of Hadrian’s Wall Capital I knew little, and as an investment writer this was a helpful introduction. Mr Price was quizzed by Mr Elliott in an interview that ranged through developments in communications technology, artificial intelligence, cloud computing and robotics. Mr Price had the good sense to provide only a handful of Powerpoint slides. When I asked for a copy of one of them, his assistant kindly emailed a briefing on the trust running to no fewer than 68 head-spinning pages of which Nasa would have been proud. If this was an “inducement to trade” it could fairly be compared to providing the specifications of the Hadron Collider to a baboon.

Two useful takeaways from this presentation: first, here was a fund manager of more than 30 years’ experience in this sector providing a breakdown of a £450 million trust diversified both by geography and sector and whose shares have risen 229 per cent in five years. And arguably the best received briefing was that by Temple Bar manager Alastair Mundy, with a distinctly energetic and galvanising presentation – the Nigel Kennedy of fund managers.

Is giving a lively presentation an inducement to trade? Carry on with regulation of this sort and there will not be an investment analyst or fund manager who dares speak to anyone without a handkerchief stuffed down the throat.