View more on these topics

The ingredients for a great story

May I convey my admiration of the financial services industry for providing the financial journalist with an uninterrupted and secure supply of material for contentious articles?

The provision of the vital ingredients for conjecture is so continual and consistent that the freelance writer is spoilt for choice and can look forward to decades of predictable cash flow and plenty of variety.

We simply blend together three vital attitudes to make a good story:

1: Consumer greed and suspicion.

2: Regulatory arrogance and ivory-tower myopia.

3: Practitioners&#39 and providers&#39 paranoia.

Mix these together carefully and you have an ideal article to stir the readers&#39 indignation. The only dangers to a successful article, given the abundance of subjects, are objectivity and wisdom.

There are many examples but the with-profits debate is a corker. An objective approach would not miss the simple yet profound truth that with-profits has delivered results that exceed the customers&#39 original expectations with security in an environment of turmoil.

It has, to my knowledge, yet to fail. But this is no story worth reading as it does not satisfy any of the three attitudes above.

So much has been said of the past and current, let us leave it for the moment and look at the juicy delicacies ahead, which Mr Sandier is cooking up for us.

His proposals for “smoothed investment funds” look reasonable if read objectively and wisely. He will succeed in increased transparency, ringfencing, removal of conflict of interests between share-holders and policyholders and some guarantees.

He will prevent the provider using the hinds but at the same time will remove their ability to “prop” them up.

Now, let us apply our three golden rules to Ron Sandier s proposals for the annual statement disclosures. The statement will disclose current value at surrender (set yearly in advance), current death benefit: value of the underlying assets (that is, the unsmoothed asset share), current state of the fund, asset allocation, costs charged to the fund, state of the “smoothing account”: the MVA. This is unprecedented availability of information, heart-warmingly open to misinterpretation.

Any self-respecting journalist who cannot make a good story out of the above does not deserve to eat.

He can highlight the “unfairness” of unallocated funds in the smoothing account not being added 100 per cent to the policy during times of boom, the fear when the smoothing account diminishes in value or runs into deficit during slumps, the high charges for the underwriting premiums which provide notional protection, the wickedness of the MVA, the greedy commission, the selfishness of the host company not beefing the fund when it languishes and the poor relative performance when the FTSE is surging upwards.

And to make sure the reader is gripped by the essential indignant attitude, he can spice the article with a lavish and prominent use of the stirring word scandal.

It is open season to hunt down the industry. Unlike most game, however, the industry is more than capable of such a considerable defence that its antagonists could easily be made to blow themselves up on their own bombs. Inexplicably, though, the industry meekly accedes to its own demise.

Charles Moran,

Cobham,

Surrey

Recommended

Fund firms put new life in pensions

One of the points identified in the Sandler report is that the pension tax regime creates artificial barriers to non-life insurance providers, such as specialist investment houses.The fiscal handicap pinpointed by Sandler is an anomaly that the Individual Pension Account was supposed to address but clearly has not. Since its introduction in April 2001, there […]

Freedom Finance puts Snowdon on top

Wilmslow based mortgage and loans broker Freedom Finance has appointed Colin Snowdon, currently managing director of specialist lender Verso, as MD of its new Freedom mortgage subsidiary. Snowdon takes up the post in January when the merger between Verso and fellow Britannia Building Society subsidiary Platform Home Loans is completed. Freedom brokered secured and unsecured […]

NDF Administration – NDF Income & Growth Plan 3

Wednesday, 9 October 2002 Type: Guaranteed equity bond Aim: Income or growth linked to the performance of the FTSE 100 index Minimum-maximum investment: £10,000-£1m, £7,000 Isa Term: Until January 16, 2006 Guarantee: Capital returned in full at end of term provided the index does not fall by more than 20% Return: Choice of 9% income […]

Matrix Money Management – Matrix Bastion Fund

Thursday, 10 October 2002 Type: Fund of hedge funds Aim: Growth by investing in the Tremont market neutral fund Minimum investment: Lump sum £10,000 Place of registration: Dublin Investment split: 100% in the Tremont market neutral fund Charges: Initial 4%, annual 1.9% Commission: Initial 3%, renewal 0.4% Tel: 020 72920825

Indian market rallies as Modi's popularity strengthens

Kunal Desai, manager of the Neptune India Fund, comments on the implications of the BJP’s historic election win in India’s most populous state, Uttar Pradesh. Read the full article here Important Information – for investment professionals only. Not for retail clients.  Investment risks  The Neptune India Fund may have a high volatility rating and past […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment