View more on these topics

Pick a piece of friendly Pi

The old saying that constant change is here to stay has never been more true than today. Virtually all traditional businesses are facing threats from start-up dotcom companies and from mergers, acquisitions and so on.

All companies, big or small, must evolve or die.

This applies as much to IFAs as to any other type of firm. Bacon & Woodrow&#39s David Murray expects a reduction in the number of IFA businesses of as much as 25 per cent.

Of course, this is not the first time in recent years that the demise of the IFA has been predicted. Good IFA firms will adapt to the new world.

It is a sobering thought that even a huge multinational manufacturing company such as Lever Brothers is diversifying into house-cleaning as it sees threats to its traditional business of manufacturing soap powders and other cleaning products. A logical step, perhaps, but a huge change in approach will be needed, moving from mass manufacturing to service provision in individual households.

So, the brave new world is all about changing the habits of a lifetime and there is no doubt the advent of stakeholder pensions will herald a change in habits for IFAs. To maintain their income, the best IFAs will develop new areas of expertise. There are also shorter-term gains to be made by working smarter, not harder.

Tunbridge Wells Equitable&#39s Pi scheme for profit and strategy encourages IFAs to potentially increase their profits by up to 50,000 a year without finding one extra client.

How does this work? The Pi strategy is all about using the society&#39s niche products as extra sales in addition to selling mainstream products. There are over 6.5 million children under the age of eight in this country.

A friendly society children&#39s savings plan is an alternative way to save for a child&#39s future. Tunbridge Wells Equitable&#39s baby bond allows you to invest up to 25 a month in a tax-free fund. Tax-free here means free from income tax and capital gains tax.

Around half of those under- eights will probably go on to higher education. How is that going to be funded?

According to the National Union of Students 1998/99 survey figures, it currently costs over 10,000 a year to put a young person through university and this is before any proposed rise in the current cap of 1,025 on tuition fees. There is also speculation that tuition fees could rise to as much as 6,000 a year.

One way of helping to fund higher-education costs is to take out a tailored long-term savings plan. Comprising a series of endowments, Tunbridge Wells Equitable&#39s University Bond can provide lump-sum payments in three or four consecutive future years, just when the money is needed in time for the beginning of each academic year.

The bond can be taken out either in the child&#39s name or in the name of an adult guardian, in case parents do not trust their kids with large sums after they reach 18 – a real fear for some parents.

A further niche product offered by Tunbridge Wells Equitable is replacement income cover – an income-protection plan which shares directly in the profits generated by the underlying fund to produce a tax-free lump sum at the end of the cover term, regardless of whether the policyholder has claimed or not.

This product includes features focusing particularly on the needs of mothers and offers cover for housepersons of up to 1,250 a month at outset. So, if a mother is incapacitated, there is money available to pay for nannies, cleaners, etc.

According to Tunbridge Wells Equitable research among women with dependent children, conducted by BMRB in 1999, 85 percent of thosesurveyed had no replacement income cover if they fall ill.

The research also found that it could cost around 250 a week to pay for the costs of a nanny or childminder or for help to carry out general housekeeping duties.

There is a large number of women with children, particularly housewives, who lack cover they may well need.

Berkeley Independent Advisers member Simon Webster, of Facts and Figures, believes the Pi structure is a valuable tool for IFAs by highlighting their options.

He says: “I think Pi hasreally made me more aware of other niche products I can effectively market to our existing client base. This type of initiative should certainly help quality niche players, improve their share of the IFA market.

“Deprived of Isa investment, it can be argued that every young child in thiscountry should have a long-term savings plan.”

Recommended

Lincoln in dual link for Luxemburg bond

Lincoln Financial Group has joined up with Luxemburg life office Sogelife and SG Hambro to offer tax benefits and investment management through its new Luxemburg-based bond.The Lincoln Privilege bond is a single-premium non-qualifying whole-of-life policy iss-ued by Sogelife. Fund management is provided by SG Hambro Bank & Trust.The bond offers the choice of three managed […]

FSA says ISAs better than personal pensions for most

The FSA says that the average investor saving for their retirement would be better off putting their money in ISAs rather than personal pension schemes.The regulator says that basic-rate taxpayers especially, who wouldn&#39t benefit from the tax breaks offered by personal pensions as would higher earners, would be better off investing in low-cost ISAs.FSA research […]

Break away from the pack

Sometimes it is too easy to slip into a familiar pattern. I think some parts of the investment industry are in danger of falling into this position. At times, the industry seems stuck in an intellectual rut, unable or unwilling to embrace new methods or new ideas.Witness the dreary and unimaginative debate between active and […]

Stock exchange merger comes under fire

The London-Frankfurt stock exchange merger may be put on hold after representatives of both parties have expressed reservations about aspects of the deal, the BBC reports.Last week, Deutsche Borse supervisory officials, German regional government representatives and German Central Bank officials all publicly said they have problems with the merger.One of the main complaints from the […]

China’s economic bounce may already be over

By Mike Riddell (17 May 2016) Most people would explain the rally in global risky assets since mid-February as being primarily down to the spectacular volte-face from the Federal Reserve, where Janet Yellen (and others) dramatically toned down their narrative that the Fed would be hiking rates as many as four times in 2016. This explanation […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment