There was a good article by Paul Killik in the latest Killik newsletter. This is some of what he said:
“I struggle with the fact that they [retail investors] are actively encouraged to use funds, predominantly in the form of open-ended collective investment schemes such as unit trusts, to get an exposure to shares. Instead. I feel that they should be buying directly into the underlying securities. The disastrous, ongoing collapse of private shareholder participation in the UK stock market underscores my view. It is an issue I very much hope the latest administration will address”.
He points out how retail participation in the UK stock market has declined sharply over the last 50 years to near 11%. He says “Buying a pre-packaged investment fund from a regulated product manufacturer is billed as removing the hassle of putting a portfolio of shares together and then having to manage it. However, this is misguided. The direct ownership of companies is central to the overall health of capitalism”.
“Both in the UK and across Europe, tax policy in particular has been skewed towards encouraging retail investors into collective investment schemes and away from direct equity investment”. He also criticises the process of “dematerialisation” of share certificates which has resulted in shareholders losing valuable rights and made it more difficult for shareholders to vote. He says: ”Looking ahead. I would ideally like to see a change in the law to remove the concept of a beneficial shareholding so that we reinstate the core principle of legal ownership for smaller investors, something technology now permits.
It is particularly disappointing that, even as concerns mount about the way the London market is withering, existing tax policy appears to still encourage institutional fund management over direct investment. Coupled with a consistent failure to protect a number of basic rights that retail investors have lost over the years, this seems short-sighted, at best. I therefore urge our new government to revisit this issue as soon as possible”.
This article certainly spells out much that is wrong with the UK stock market that needs fixing if retail investors are to be better treated and not lose out to institutions and fund managers who erode their returns.
You can read the Killik newsletter containing Paul’s article here: https://killik.com/guides/confidant-summer-2024/
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
You can “follow” this blog by entering your email address in the box below. You will then receive an email alerting you to new posts as they are added.