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HL sparks IFA row as it stops WP sales

Hargreaves Lansdown has put the sale of with-profits products on hold for the next few years in a move condemned by other leading IFAs.

The Bristol intermediary says any money going into with-profits will simply be used to repair damage to ravaged funds if markets improve. If markets continue to slump, it says life offices could see free-asset ratios dwindle to zero and be forced to freeze bonuses.

But the David Aaron Partnership says the move is a kneejerk reaction and Chartwell says Hargreaves Lansdown may be making a dangerously sweeping statement. Bates Investment Services has reviewed its position but continues to sell with-profits and remains confident that funds can withstand further market drops. All say the funds are still appropriate for some investors.

Hargreaves Lansdown is applying the decision to all with-profits business except ringfenced stakeholder contracts. It will review its decision regularly but says it will take many years for funds&#39 health to improve. It recommends existing with-profits&#39 clients to hold on to their investments.

It also says it is “poetic justice” that providers which only recently entered the with-profits bond market have been hit hardest by stockmarket falls.

The move comes ahead of next week&#39s expected shake-up of with-profits from the Sandler review.

Norwich Union and Standard Life have defended the suitability of with-profits while Prudential says it is confident of continued IFA sales.

Chartwell Investment Management chief executive Craig Wetton says: “It is dangerous to make sweeping statements about all with-profits funds. Reserves are under pressure and being called on but there are still funds that can and should be used on an ongoing basis.”

David Aaron Partnership investment analyst Robin Bone says: “It is Draconian – there are issues with with-profits but some funds have done a very good job and they will remain an important asset class for us. I can see where they are coming from but this is extreme and a kneejerk reaction.”

Hargreaves Lansdown inv-estment manager Ben Yearsley says: “This is not a one-month publicity stunt. Other IFAs do not agree because with-profits is an easy sell and they get lots of commission.”

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