They say politics is more determined by negative drivers than positive. Clown-like or otherwise, Donald Trump, Nigel Farage et al are anti-politicians who embody many of the characteristics that people feel are absent from their mainstream rivals.
There has been a clear pendulum swing away from mainstream political institutions as wider disillusionment with the establishment deepens, which opportunists have captured well. But physics dictates that once the pendulum bob is displaced from equilibrium it begins a back and forth motion from one extreme to the other. So too, seemingly, with bonds, particularly of the onshore variety. Once a mainstay of the financial services suite the onshore bond has been somewhat beleaguered.
Chronic levels of misuse and abuse in the past have certainly not helped their image but there has been a noticeable move away from their inclusion in financial planning, even the though the days of high allocations and commission are a thing of the past. But should RDR, per se, influence the suitability or otherwise of bonds?
The commission ban may certainly have led to the correction of inappropriate use but there is a further sense from most advisers that the bond is becoming less relevant and I am not sure why when we look objectively at the benefits onshore bonds can provide.
RDR has not changed the tax benefits of bonds. But, tellingly, what it has changed is advisers’ processes which have become, as required, robust, repeatable and all the other stuff that has been talked about ad infinitum. The standardisation of investment advice processes coupled with the need, by many, to facilitate adviser charging through the product (adversely affecting 5 per cent withdrawals) has put bonds way down the pecking order. And not always correctly so.
Research we carried out in 2012 suggested strongly that the advent of the RDR would not have a negative impact on adviser propensity to recommend particular products in any significant way, with solutions remaining just as relevant post-RDR.
There was recognition that bond use would certainly become more niche but that niche would likely be far bigger than previously, as a) a far higher proportion of core advisory clients are likely to be higher-rate taxpayers and b) tax optimisation moves towards the centre ground of financial planning.
Well, it is certainly more of a niche but perhaps too much of one to suggest that a) and b) have happened to the extent advisers were anticipating.
Phil Wickenden is managing director at Cicero Research