View more on these topics

Product Matters

Norwich Union&#39s latest structured offering Prosper 2 is an interesting concept but does not necessarily offer good value.

Spread over a four-year term, which is divided into eight six-month periods, the returns are linked to the FTSE 100 index.

Basically, the maximum gain or loss is capped at 6.5 per cent in each six-month period and these are all added up at the end of the term. Capital is guaranteed so even if the losses outweigh the gains an investor cannot lose money.

However, in a volatile market, which at the current low level may see some large spikes upwards, the 6.5 per cent limit could well handicap the product.

My preference is a straight participation rate product such as Standard Life&#39s guaranteed FTSE bond.

One issue that IFAs need to consider with FTSE 100-linked structured products is that they do not benefit from the income yield of the FTSE 100 index.

If we assume that long-term total returns from UK equities will be around 7.5 per cent a year, then a product linked only to the capital performance of the the FTSE 100 will miss out on nearly 50 per cent of the total return – the FTSE 100 net yield is currently around 3.6 per cent.

My view is that NU would better serve its IFA customers by changing its with-profits bond offering to a 100/0 structure as soon as possible.

Following the Sandler review, IFAs are already looking to move to contracts that incorporate the most “Sandler-friendly” features. This is an area where NU can compete effectively but it must move quickly.

James Dalby is head of research at Bates Investment Services

Recommended

LloydsTSB set to enter sub-prime mortgages

LloydsTSB is poised to enter the sub-prime mortgage market and is recruiting senior managers and directors for the new division, according to industry sources.One industry source says the bank, which owns mainstream lender Cheltenham & Gloucester, is not considering acquisitions but has instead appointed a recruitment consultancy, Maloney Search, to recruit staff from potential rivals.Another […]

N&P appoints marketing man

Norwich & Peterborough has announced an appointment to its board as Mike Hounsell joins the building society as marketing and sales director.Most recently, Hounsell has worked for Broadband communications player NTL as chief marketing officer. Prior to that he worked for American Express UK, where he was responsible for product and brand marketing.N&P chairman Keith […]

Sweet Charity

Welcome to my first column as I take over from my old friend Brian Lawless. Brian will certainly be a hard act to follow but I would like to start with a topic frequently raised by financial advisers – suitable investments for charities.Most charities are constituted as trusts. The last few years have certainly been […]

Zurich moves Keogh from ZIFA to ZAN

Zurich Financial Services has appointed Chris Keogh as financial planning director of Zurich Advice Network. He was previously distribution director of Zurich IFA Group. The appointment comes ahead of an announcement on the company’s distribution strategy in Autumn to take advantage of the current changes in the market.

The return of emerging markets

Ewan Thompson, Head of Emerging Market Equities, Neptune Although in political terms 2016 will be remembered for the seismic shocks of the Brexit vote and Trump’s presidential victory, the year was also a watershed for the global economy and emerging markets in particular. Following five years in the wilderness, the conditions are now in place […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment