How to futureproof your family’s finances

It is a challenge that has faced families for millennia. How to preserve and grow your wealth to secure your family’s future – while protecting them from undue risk.

Investment trusts have been helping families like yours grow their wealth for generations. Under different governments, through market cycles, wars and recessions, they have evolved and adapted, rising to countless challenges while generating impressive long-term growth. Or a reliable, resilient income.

A history of evolution

The very first trust, F&C Investment Trust, was established in 1868 to bring access to investment expertise to “the investor of moderate means”, and is still going strong today. The trust now manages more than £6 billion in assets for thousands of investors.

It proved so popular that it was soon joined by many others, spawning an industry that is still thriving. Over the years, investment trusts have evolved to provide investors with access to a wide variety of assets, from stocks and shares to property, private equity to venture capital, renewable energy to space technology. No other investment vehicle offers such a diverse choice of holdings, helping families plan for all eventualities.

Today there are over 300 investment trusts to choose from, managing more than £260 billion in assets. Which one is right for you will depend on your individual circumstances, your financial priorities, appetite for risk, and timeframe.

But you can start by exploring the AIC website to see some of the options at your disposal.

Here you can find a wealth of information that can help you futureproof your family’s finances, ensuring they never have to worry too much about how they will meet their expenses. Whether planning for yourself or for future generations, the AIC’s website can provide information and guidance to get you on your way.

Built to maximise growth

Investment trusts have outstanding long-term performance records. The average trust has transformed an investment of £1,000 into £2,740 over the past ten years. Over a 20-year period that £1,000 investment would have grown to £8,202.

It’s important to realise that as with any investment, your capital is at risk. There is no guarantee that you will get back more than you invested, and you should be prepared to hold for the long term: at least five years, and preferably ten or more.

Investment trusts’ strong performance over the long term is aided by their ability to take a patient approach to growing shareholders’ wealth, in line with many families’ time horizons.

Each investment trust is governed by an independent board of directors. The board has one job: to look after your interests as a shareholder. Unlike with other kinds of fund, the board is in the driving seat. They hire the asset manager, negotiate fees with them, and can fire them as well if performance isn’t up to scratch. This ensures that shareholders are put first.

Maintain your income

Investment trusts are unique among funds in that they are able to withhold up to 15% of the income that they earn in good years to pay out in leaner ones. This means that they can smooth out income over time, helping reduce the impact of volatile markets on your dividends.

While dividends are never guaranteed, some trusts have been so successful at providing a reliable income that the AIC now provides a list of 20 “dividend heroes”. These are trusts that have managed to increase their dividend payouts for 20 years or more. Some of the heroes have increased their dividends every year for more than 50 years – including City of London Investment Trust, which has not cut a dividend since the release of Sgt. Pepper’s Lonely Hearts Club Band by the Beatles…

Follow the smart money

The structure of investment trusts was so popular that they became the preferred choice for some of Britain’s wealthiest families. Witan Investment Trust (now Alliance Witan) was created in 1909 to manage the estate of the first Lord Faringdon, Alexander Henderson.

The Brunner family, a renowned international dynasty of aristocrats, entrepreneurs and politicians, founded the Brunner Investment Trust in 1927, to hold the family’s interest in the vast chemicals group ICI. And the Rothschild family set up the Rothschild Investment Trust in the 1980s, now called RIT Capital Partners. All are still running today, and the founding families still have substantial holdings, yet they are open to all investors.

While these particular trusts may or may not be right for you, there is something appealing about investing your money in the same vehicles that these families continue to trust with their own fortunes today.

Peace of mind

Once you have thought about your priorities, your timeframe and your attitude to risk, you can find the right investment trust for you.

Whatever you decide, you will have the peace of mind that you are investing in the oldest, most established investment vehicles in the UK, alongside some of Britain’s wealthiest families, and among tens of thousands of private investors who have placed investment trusts at the heart of their financial plans.

For more information about how to futureproof your family with investment trusts, simply click here.

As with any investment, the value of investment trust shares can fall as well as rise. There is no guarantee you will get back what you invested. Dividend payments are not guaranteed, and dividends may be cut or cancelled altogether without warning.