View more on these topics

Actuaries send out warning on WP bond sales

The Faculty and Institute of Actuaries has raised the alarm over the marketing of with-profit bonds, prompting fears of a repeat of the endow-ment crisis.

In a letter obtained by Money Marketing, the F&IA voices its fears that consumers are being misled by headline bonus rates in life offices&#39 marketing literature and are ignorant of the actual rates their with-profits bonds are paying.

It claims there is a mismatch between perceived bonuses and life office reserves and it is warning this imbalance must be addressed.

The F&IA brought the endowment market to its knees in November and could now be set to torpedo the with-profits bonds market. It summoned life office appointed actuaries to London at the end of June to discuss what action should be taken.

There was unanimous agreement on issuing a position statement on best practice.

A letter went out on June 30 from F&IA life board chairman Charles Thomson, warning that reserves need to be set to reflect consumer expectations, particularly if clients have received advice indicating, in certain circumstances, MVAs would not apply.

The reserves necessary to cover this will be substantial, according to the F&IA.

The letter says: “There are also concerns about the pricing and reserving implications of office practice on market value adjustments, particularly if there is a practice (rather than a guarantee) of non-application of MVAs.”

KPMG principal consultant John Jenkins says: “It all comes down to the sales end of the process. There could be problems there.”

Syndaxi director Robert Reid says: “With-profits bonds are fine as part of a well structured portfolio. The concept they can deliver all things to all people is fundamentally flawed and in some cases this has been ignored by practitioners.”

Prudential retail IFA marketing director Gavin Stewart says: “I think it could affect a limited number of offices. Those that don&#39t have enough financial strength could find themselves in trouble if they have to increase their reserves.”

Comment, p29

Recommended

Small business should be big business

IFAs need to start plugging the knowledge gap among small business owners on self-certification mortgages.Despite an increasing number of mortgage lenders providing self-cert products, this option is little understood by a large proportion of its target market – the owners of small businesses.There are around 15 lenders offering self cert mortgages through intermediaries. With nearly […]

Jobs to go as Zifa rejigs IFA support

Zurich IFA is restructuring its technical support and sales teams for IFAs in a move aimed at creating a better level of service.As a result of relocation of staff and new roles, 40 Zifa employees will be redeployed or made redundant.From September, each independent adviser will be given details of three contacts who will be […]

Electronic signatures become legal

Electronic signatures are officially legal as of Tuesday as the Electronic Communications Act came into force this week. The move is seen as a milestone by mortgage providers that has been prevented from fully embracing e-commerce because the signatures were not allowed. On-line applications for loans and other investment products can now be authorised using […]

Virgin One tests out sales through IFAs

The former bete-noire of IFAs Virgin is continuing to woo the intermediary market, testing out sales of the Virgin One account through fee-based advisers.Virgin Money has been conducting trials of its Virgin One account with IFA Maddison Monetary Management over the last six to eight weeks.The findings will be used by Virgin One managing director […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com