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The true cost of tailored protection

It was good to read the positive coverage of the launch of Riley, Royal London’s new investment bond (Money Marketing, August 31).

Justin Modray’s review reflected some uncertainty in relation to the cost of protection, with the suggestion that Riley might be expensive. It may be useful to IFAs if I explain that, for each investor, an individual cost of protection is calculated by Goldman Sachs, which provides the insurance.

The cost varies on a daily basis, depending on the protected amount – between 0 per cent and 110 per cent of the investment, the term to the insured date and the market conditions at the time. This approach means it is the true cost of providing the protection that is used.

The key point is that the level of protection can be tailored by the IFA to each individual’s needs. So each Riley bond can reflect not only the investor’s risk outlook but also their individual perception of value.

Finally, Justin Modray asks a pertinent question about why someone should pay for protection when the chances of losing money over 10 years in a well diversified portfolio are slim, with the upside probably higher. If this was the view of the individual customer, then Riley may not be the product for them, although they could choose to have 0 per cent protection at the outset, with the option to introduce partial, or full, protection later,if their view of the stockmarket became more pessimistic.

The reality is that there are all types of individual, with all shades of outlook. Not all will find Riley appropriate; but a very large number will.

Roger Edwards
Head of marketing development, Scottish Life

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