Type: Unit-linked bond
Aim: Income and growth by investing in a choice of over 100 fund links
Minimum investment: Lump sum 5,000
Fund links: Over 100 funds from 34 fund management groups
Allocation rates: 97-102.5% with full commission, 104.3-110.22% with no commission
Charges: Initial up to 3% for investors age 70-85 will full commission, annual 1.55-2.48% depending on fund chosen
Special offer: Extra 2% allocation
Offer period: Until further notice
Commission: Menu-based – initial up to 7% or initial up to 4.25% plus renewal up to 0.5%
Tel: 0800 023 4141
FundNetwork has brought out its Investment Bond, a unit-linked bond providing access to over 100 fund links.
Arch Financial Planning managing director Arthur Childs believes fund supermarkets have revolutionised the sale and administration of investment funds for IFAs. This product is likely to see an even greater revolution because of the popularity of investment bonds with IFAs, he says.
According to Childs, the marketing for this product majors on flexibility. He highlights the fact that it offers over 100 funds from 30 providers, free switches, flexible commissions, transparent charges and comprehensive trust options.
Childs points out that the product design has been provided by Standard Life, as is the service support. A big plus is the level of allocation rates, which depend on the amount invested and the age of the life assured. The lowest allocation, 97 per cent, is for an investment of less than 15,000 on full commission for a person aged over 80. As there is no bid/offer spread, this is still attractive.
The highest allocation, 110.22 per cent, is for an investment of 100,000 or more with no commission for a person aged under 70. However there is a 2 per cent enhanced allocation for a limited period, which is in addition to these rates. IFAs will be given two weeks notice of it ending.
Childs also thinks the extra units, which are added at the rate of 0.5 per cent a year from year six onwards, is a good feature. IFAs will be drawn to the fact that from January the bond will be integrated with the FundsNetwork valuation service for consolidated reporting. Quotes are available via the Exchange and FundsNetwork which is extremely easy to use. I found the fund choice area particularly helpful, as was the presentation of the commission gift and the varying growth assumptions for different types of funds. Exit penalties are shown in cash terms rather than as a percentage, he says.
Moving to the possible downsides of the product Childs says: This bond is an important step forward for the majority of IFAs who are not yet ready to use a full wrap. It is unfortunate that the annual management charges are quite so high. The extra units from year six may prove less of a selling feature against these total charges.
He also feels the division of the bond into 20 segments could be inflexible from a tax planning point of view for larger investments. He notes there is a maximum of 12 funds at any time, which is fine, but there is also currently a limit of 20 funds during the life of the bond.
Childs thinks competition will come from Skandia, Winterthur and the Selestia Fund Supermarket.
Suitability to market: Good
Investment choice: Good
Adviser remuneration: Good