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Neville James harnesses teps and zeros

Examining the strong points offered by the product, Ball says: "There is the solid asset backing of TEPs, the flexibility of cashing in and tax effective potential, the fact that it is Isle of Man based and so provides lower tax charges, the fact that it offers redemptions in any freely transferable currency and lastly the fact that it has open ended investment flexibility."

Bulgin says: "The main strong point is the combination of TEPs and zeros in the one fund which should give more attractive returns than zeros in the short term. Also active fund management should boost returns."

Laymond says: "This product offers low risk modest returns which are virtually guaranteed and which should return about nine per cent net. This may not seem much to some investors but it will appeal to the cautious client."

Stevens highlights three strong points. He says: "Firstly there is the combination of TEPs and zeros, offering equity exposure and security combined. Secondly there is no winding-up date and thirdly there is the ability to buy into TEPs and zeros without buying the securities piecemeal."

Turning to the other side of the coin, looking at the product’s drawbacks, Bulgin says: "This product is offshore, which some clients do not like, and over the long term returns may be less than some other growth funds. However this fund is more secure than a typical managed fund."

Laymond says: "Investors cannot benefit from full exposure to equity markets and also returns may not keep up with inflation," while Stevens points out that: "Active management is needed in case the rise in one asset class is cancelled out by the fall in the other."

Ball says: "The negative points are that income has to be taken from capital growth only, and there is a potential risk if the zeros fail to meet stated maturity values, but this is considered a low risk."

Evaluating the investment strategy, Ball says: "This is one of the best risk averse strategies available today."

Bulgin says: "The investment strategy looks sound. Neville James is experienced in the TEP market and Hill Osborne, the secondary investment adviser, appear to have good experience in the zeros market."

Stevens says: "The investment strategy is very good but it needs careful management. TEPs will improve if equities do really well, likewise zeros if gilts or corporate bonds do well."

Looking at Neville James’ reputation, Ball regards it as a sound and able operator, while Laymond thinks that it is excellent. Bulgin says: "Neville James is very good in the TEP market."

Stevens says: "Neville James does not much name awareness among clients, but IFAs do well to be aware of relative newcomers to the retail market, as this is where the new ideas often originate."

Addressing the issue of charges, Ball says: "The charges are fair and reasonable, comparable with fund management risk, which is considered low."

Laymond says: "The charges within this contract are fair and are almost near the maximum stakeholder charge of one per cent," while Bulgin says: "Yes the charges are fair and reasonable, and appear fine for an offshore product, which are usually more expensive than equivalent onshore products."

Stevens adds: "The charges are fair and reasonable. We should not forget however that the with-profits office will be making a charge on the funds, so there is an element of double charging. Clients need to be aware of this."

Turning to the commission, Laymond says: "The menu of nil to five per cent is in keeping with many plans and even bonds. However, due to lower returns from this type of contract it would be against a clients’ best interests to take more than, say, two to three per cent."


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