Investors require uniform communication on after-tax commentary, along with standardised protocols, as a varied or complex approach will be not be embraced.
Investors, advisers and researchers were used to ignoring tax when it came to measurement, White Funds Management managing director, Angus Gluskie, told delegates on the last day of the Association of Superannuation Funds of Australia’s (ASFA’s) National Conference in Sydney.
It was not good enough just to manage tax efficiency, it was vital to report on it, provide after-tax benchmark indices and calculate after-tax performance consistently, Mr Gluskie said, from the experiences of the listed investment companies (LICs) sector.
Much like superannuation but unlike unlisted investment trusts, LICs paid a level of tax and had therefore become tax-aware investment vehicles and developed investment management styles and processes, which were aligned to the delivery of tax-efficient returns.
“The more uniformity, the less complexity and the greater the ability for investors to embrace after-tax reporting,” Mr Gluskie said.
“The more standardised and uniform the reporting benchmarks and process, the more investors will accept it. If after-tax reporting is too varied or complex, it will be ignored.”
The LICs industry’s implementation of standard after-tax reporting was in progress, but adoption across the whole industry reinforced investor familiarity with after-tax measurement.
Furthermore, adviser and investor administration systems generally worked with and calculated before tax, not after-tax, performance data.
Mr Gluskie said industry participants may need to get together to agree on standardisation protocols.
United States studies had found that LIC investors were generally of higher net wealth and had higher education levels than investors in other types of funds.
“Our experience over the years has shown that investors do identify very well with tax efficient investing, [therefore] it’s a strong selling point,” Mr Gluskie said.
“The more sophisticated the investor type, the greater identification with tax, cost or structural efficiencies.”
