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Growing pains

BondType: Capital-protected bondAim: Growth linked to the performance
of the Wesleyan Life managed fundMinimum-maximum investment:
£10,000-£500,000Term: Six yearsReturn: 100% of the growth
in the Wesleyan Life managed fundGuarantee: Original capital returned
in full regardless of performance of the underlying fundClosing date:
December 31, 2004Charges: Investments under £25,000 – initial
10%, £25,000-£50,000 – initial 9%, above £50,000 –
initial 8%Commission: Initial 6%, or Initial 3% plus renewal 0.5%Tel:
0845 351 0148Wesleyan Assurance has entered the IFA market with a
capital-protected bond linked to the performance of the Wesleyan life
managed fund over a six-year term.

Highclere Financial Services partner Alan Lakey believes struct-ured
products like this, which have a guaranteed return of capital, are
essential to counter the negativity of the precipice bond scandal.
However, he says: “Interestingly, Wesleyan uses the word guarantee
in its literature which is something that the FSA has historically
frowned upon.”

Lakey points out that the bond is available until the end of the year
and invests in Wesleyan’s well regarded managed fund. He says: “With
a minimum investment of £10,000 and a maximum of £500,000,
it has a typical bond design.”

Lakey thinks the initial 3 per cent plus 0.5 per cent renewal
commission option is typical for bonds but he says the other option
of 6 per cent initial and no renewal is far higher than the usual
amount offered by guaranteed Isa competitors.

Looking at the negative features of the product, he says: ” The
allocation rate is between 90 per cent and 92 per cent and over the
six-year term, this reduces 6 per cent annual growth to 3.2 per cent.
Like all bonds, this may be unsuitable for those people likely to be
high-rate taxpayers at maturity.”

Turning his attention to possible competitors, Lakey says:
“Investment bonds without the guarantee but with the far higher
allocation rates are likely to provide the main competition. However,
guaranteed Isas are likely to be more tax-efficient and

Summing up, he says: “While Wesleyan’s investment prowess is
respected, I feel that the high charges which result from the low
allocation rates is a major deterrent. The managed fund will need to
outperform the average by around 1.5 per cent a year to balance the
effect of the allocation rates.”

BROKER RATINGSSuitability to market: AverageInvestment strategy:
GoodCharges: PoorAdviser remuneration:
AverageOverall: 6/10


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Dynamic entrance

JP MORGAN FLEMINGJPMF Europe Dynamic (Ex UK) FundType: OeicAim: Growth by investing in growth and value stocks in Europe excluding the UKMinimum investment: Lump sum £3,000, monthly £100Investment split: 100% in growth and value stocks in Europe excluding the UKIsa link: YesPep transfers: YesCharges: Initial 5.5%, annual 1.5%Commission: Initial 3%, Isa renewal 0.5%Tel: 0800 727770JP […]


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