Strategic Income Isa
Type: Unit trust mini or maxi Isa
Aim: Income by investing in UK investment grade corporate bonds and European non-investment grade corporate bonds
Minimum investment: Lump sum £1,000, monthly £50
Maximum investment: £7,000
Investment choice: UK investment grade corporate bonds 70%, European non-investment grade corporate bonds 30%
Yield: 6.33% gross a year
Charges: Initial 3.5%, annual 1.43%
Commission: Initial 3%, renewal 0.5%
Tel: 0845 8450022
Stuart Hawksworth – Managing director, Townends Financial Consultants
Shane Fox – Independent financial adviser, IMS
Adrian Wilkins – Senior associate, Thomsons Wealth Management
Ralph Stather – Sole proprietor, Retirement Options
Miles Moseley – Managing director, MM Financial Management
Suitability to market: 5.8
Investment strategy: 6.0
Past performance: 5.0
Companys reputation: 4.6
Product literature: 5.8
Scottish Widows is offering the opportunity to invest in investment grade and non-investment grade corporate bonds with its strategic income Isa.
Looking at how the Isa fits into the market Wilkins says: "It has lower capital risk than a high income fund, while offering a competitive yield."
Fox feels it is a safe product for the risk averse client, while Hawksworth says: "As a high income fund, the product is ideal for the Isa market. Many clients are looking for a higher income and will be attracted to the Scottish Widows name."
Stather says: "Another corporate bond fund, obviously looking to produce a steady income yield."
Moving on to the type of client the Isa is suitable for, Fox feels it will appeal to anyone who is risk averse. Hawksworth says: "The ever-growing list of clients looking to maximise income, clients looking to supplement income in retirement."
Stather pinpoints clients who want a steady income or feel that equities are too volatile. He adds that it will appeal to clients who like a well-known name.
Moseley has similar ideas: "Lower risk investors or those looking to diversify away from equities."
Wilkins feels it will appeal to someone looking for a good income return in the medium to long term with a lower attitude to capital risk than a high income fund investor.
Turning to the marketing opportunities that the product will provide Wilkins says: "Clients who have become reliant on 5 per cent withdrawals from with-profit bonds whose bonuses have now dropped, but would like to maintain or increase their incomes."
Hawksworth feels it will appeal to clients who are looking for a high level of monthly income, while Fox says: "Those avoiding stockmarket bear markets and looking for steady annualised growth."
Moseley says he likes to buck the trend, and would therefore feel it is a good time to invest in equities as they are relatively cheap. Stather says the marketing opportunities lie with existing Scottish Widows clients who have not invested before.
When asked to identify the main useful features and strong points of the product Hawksworth says: "The availability of monthly income and the strong brand name."
Fox looks at the worst case scenario and says that if monies were required in an emergency, you would not expect there to be a great loss of capital due to where the monies are invested.
Stather mentions: "The mix of investment grade and high-yielding bonds and the extension into non-UK markets especially Europe where this sector is expanding."
Wilkins likes the quarterly statements, the minimum 70 per cent in investment grade stocks, the lack of exit penalties and feels that the yield is good.