View more on these topics

Arrogant actuaries have lost the way for with-profits

Terence O&#39Halloran is certainly keen on his insurance (Money Marketing, October 25). He has lambasted Roger Harris and has allowed his heart to rule his head.

With-profits endowments for savings are inappropriate in the majority of circumstances. They are tax-inefficient, inflexible and very expensive.

Individuals have far more flexible and cost-effective arrangements available – as well as personal tax allowances – which are better than the life insurance industry rehime. This is before considering the tax treatment on gilt profits or more technical considerations.

The with-profits industry has much to answer for. Its actuaries have been – and are – arrogant and patronising. They have lost their direction when compared against the industry&#39s most honourable roots.

Exorbitant commission and selling costs are debited to the fund, as well as the opportunity to deduct pension misselling compensation, fines and any other charges fancied, under the label of “business sharing”.

For a mutual, there is no choice – but for a proprietary company? Indeed, for the regulator to allow these costs not to be shown within individual presentations to clients is misleading, to say the least. How about passing the bulk of previously undistributed, “orphan” reserves back to the proprietary company?

The latest “trick” is market value reductions. And there was the reluctance to use the word “reduction” – even though I am unaware of any upward adjustment.

The industry must stop selling these products as safe and stable when small print provides a cop-out and the next scandal – which would be far worse than the Equitable Life debacle. Indeed, even the biggest is not prepared to give a guaranteed exit without MVR, retaining discretion on everything at all times. Surely death as the only certainty is of little consolation?

Mr O&#39Halloran&#39s view seems to be the usual excuse used by the heavy smoker trumpeting that his 98-year-old grandfather smoked until he died. How much evidence is needed?

The ideal tax and cost wrapper for individual investors is probably an investment trust. The challenge to the industry must be to adapt this wrapper to generate smooth returns – if that is what investors want.

If the average adviser really understood how much discretion the insurance companies have over their with-profit funds then he is likely to stop using them. Ignorance is no excuse – even though the opaque nature encourages it. If the concept had just been invented, who thinks the regulator would agree to it?

And is it not strange how quiet all these companies have been about the levels of their reserves these last few months. I wonder why?

Philip J Milton

Barnstaple, Devon

Recommended

TrustNet wins IFA white-label deals

IFA Allenbridge Group and Bankhall&#39s IFAengine portal have signed a deal to white-label TrustNet&#39s online information tools, incorporating them into their consumer websites.The deals mark the first stage of TrustNet&#39s strategy of expanding its presence in the IFA market through white-labelling its web-based portfolio tools across the IFA market.Customers of Allenbridge Group and Bankhall members […]

1

Opinion poll

The report (Money Marketing, October 25) that Marlborough Stirling&#39s research has found that 53 per cent of people prefer not to meet their financial adviser in person flies in the face of general perceptions. It also contradicts other (perhaps more disinterested) research studies as well. Typically, you would expect to find that some 70 per […]

Clydesdale offering all-in-one mortgage

Clydesdale Bank is offering a flexible current account mortgage which gives homeowners options at times of economic uncertainty.The Rapid Repay mortgage combines the borrower&#39s current account, overdraft, personal loan, mortgage and savings facilities.Repayments to the acc-ount reduce the outstanding loan balance and the account gives instant access to borrowing and savings facilities. There are no […]

Nationwide passes on full rate cut

Nationwide is passing on the full 0.5 per cent of the Bank of England&#39s base rate cut to borrowers.The reduction sees its base mortgage rate cut to 4.74 per cent. Its standard variable rate is cut by 0.5 per cent to 5.24 per cent.The rate cut, which takes effect on December 1, will save borrowers […]

NATIXIS PORTFOLIO CLARITY – UK Portfolio Barometer

Natixis Global Asset Management’s quarterly Portfolio Barometer offers insights into UK financial advisers’ model portfolios and the allocation decisions they are making. Natixis’s Portfolio Research & Consulting Group works with financial advisers and other intermediaries to analyse and enhance their model portfolios and help them develop investor portfolios suited to today’s complex markets. The Portfolio […]

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