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Clients focus concerns on providers’ strength rather than market turmoil

Advisers’ clients are not asking questions about turbulent markets but about the financial strength of product providers, with some refusing recommendations to use smaller firms.

The Retirement Adviser head of retirement planning Nick Flynn said most clients are well aware of stockmarket turbulence because it is front-page news but their main concern is the safety of the firm they are investing through.

“People get the perception of security with the larger brands. I have had a few people say recently, no thanks, to a couple of the smaller brands, saying they would rather go with big brands but obviously some of the bigger brands have been in difficulty.”

Norwich Union head of annuity propositions Darren Dicks underlined the fact that insurers are in a much better position than the banks and suggested that AIG operated as a bank as much as an insurance group.

He said: “Many of the issues we have seen on AIG were because it was operating as a bank. It has a large insurance arm but it also had a large banking arm, especially investment banking. There is a difference between an insurer and a bank. We have different equity requirements and manage our risk in a different way.”

“That has not come across in the press. We do not over-loan our assets as banks do. There is a significant difference and that perception of risk is not fully out there.”
Thinc group director of research David Cartwright added: “A common question from clients about providers is, are they OK? The best we can do as advisers is pay fees to AKG and Defaqto. We are doing that work quarterly but that is as far as we can go.”

William Burrows Annuities director Billy Burrows said: “One of the most interesting things is that investors are actually safer inside an annuity than most other investments because you have the Financial Services Compensation Scheme coverage for 90 per cent.”

Annuity Direct director Stuart Bayliss said, for many clients, much of the issue has been reassuring them rather than giving specific advice on any particular action. He said: “I suspect we are all busy answering people’s concerns which is not necessarily productive. The key is to try and lock them into coming back to you in the future.”

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