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Maturity shows offshore

So which came first – the chicken or the egg?

Certainly, in the realm of the fund supermarket, recent developments suggest the early pace was set by Egg, quickly followed by Fidelity&#39s Funds Network.

Not to be outdone when a bandwagon rolls into view, Virgin launched its no-load, no-advice fund supermarket and finally the companies backing Consolidated Funds got their respective acts together for an IFA-friendly offering.

But these are still early days in the development of the fund supermarket – the egg has barely hatched into an immature chick.

The current offerings do not encompass the range of products which would normally be associated with the supermarket and, notwithstanding the initial jibes and sparring between Fidelity and Egg about who has the cornershop and who has the full-blown supermarket, further expansion is necessary before the label is truly earned.

The advantages and benefits of the fund supermarket (we will stick with the term for now) are in one-stop shopping, consolidated paperwork and administration, discounted goods and (at least in some cases) the ability to combine this with independent financial advice.

Indeed, the advantages for the adviser in being able to choose an administratively efficient option and retain the breadth of choice is certainly a valuable one.

But this fund super market chick is still blinking at the sun. There is a fully grown chicken already established which offers more choice and further advantages over the newly-born fund supermarkets.

In tandem with the offerings for UK shoppers, the wider choice comes not from within the physical confines of the country but from a short trip over the water to an offshore hypermarket.

However, the booze cruise, much beloved of residents of Essex, Kent and the deep South, is not a prerequisite to take advantage of the fund hypermarket.

It is already available and accessible from all points in the UK. Sad to say, however, there is still a lack of knowledge, and in some cases fear, of what they offer.

The offshore portfolio bond is the fund hypermarket which has been about town for a number of years. It has resisted restrictions placed on it by the Inland Revenue and offers the widest choice of funds and extra benefits both for the adviser and the investor.

Along with the features of one-stop shopping and consolidated administration, the portfolio bond offers some valuable extras.

The fund range is not restricted to a few plum deals arranged by the provider.

The full range of UK funds is generally available and established relationships with fund managers mean these are at very competitive prices.

Add in a flexible commission menu for the adviser and put the whole thing in a tax-efficient wrapper with no upper limit on the amount which may be invested (unlike Isas) and the value of the offshore portfolio bond hypermarket becomes clear.

With a broad range of investments available from a single source, it is vital that full use is made of the ability to switch in and out of these investments as circumstances prevail.

In the UK, capital gains tax hinders this ability and may delay or rush the taking of investment decisions, forcing them through at inappropriate times.

In the offshore portfolio bond there is no such problem as all switches take place within the offshore wrapper. The compound effect of these savings over time should not be underestimated.

The portfolio bond continues to evolve and providers are introducing new features such as online switching, the ability to offer discretionary portfolio management services and capital guarantees, both within the bond through the choice of funds offered and on the bond value itself – an extremely attractive feature for estate preservation.

The egg has some cat-ching up to do – the chicken has been here for quite some time and intends to stay.


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