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Pru fears over diversification

‘Baby thrown out with bathwater as with-profits reduced’

Prudential managing director (retail life and pensions) Gary Shaughnessy says the reduction of the with-profits market means investors are not getting sufficient diversification in their portfolios.

Speaking at The Savings Market conference in London last week, Shaughnessy said money which would have been invested in with-profits is now going into cash, target return funds and single asset class funds and consumers do not always understand the volatility of investing in these funds.

He said investors have a herd-like mentality, which has seen money pour into prop-erty funds rather than being spread around the various asset classes. According to the IMA, property has been the best-selling fund sector for the past nine months.

Shaughnessy predicts that there will be future growth in the with-profits annuity market and talked about the possibilities of reinventing with-profits products to boost the market’s reputation.

Earlier this month, actuary AKG said the with-profits market is fatally wounded and that advisers will struggle to sell the product.

Communications director Guy Vanner said: “It is so difficult for advisers to sell with-profits because it has such a bad name. Even if the market improves, it is so tainted that people do not want to recommend it. It has not got the ability to come back or ever be like it was.”

But these claims were rejec-ted by Norwich Union and Pru, with Pru saying with-profits bond sales have risen by 29 per cent in the first nine months of the year.

Shaughnessy said: “The reduction of with-profits market means we have seen the baby thrown out with the bath-water. Does the consumer understand the volatility that goes alongside them putting their money into single asset class funds, cash or target return funds?”


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