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True value of policy guarantees

Can it be true? Skandia closes guaranteed funds was the headline in the October 17 edition of Money Marketing.

But we were assured that this was the answer to a maiden&#39s prayer. This was the replacement for with-profits.

Peter Jordan does well to say “transparency is a tough act”. Of course it is, Peter. Those who manage with-profits funds and those of us who have been around in the industry for more than 10 minutes know that financial planning is a tough act. The only time it is not tough is when the markets are going up – then any fool can make money (and rash promises).

It is about time that the different sectors of the financial services industry recognised the strengths and weaknesses of those sectors.

The demise of the great name Marconi was reportedly brought about by its American masters wanting all five elements of their massive group to make profits all the time. That is just not how commerce works.

If you change the recipe you change the cake. Ron Sandler wants to change the recipe for a very successful cake – the with-profits cake – and he could end up with a tasteless, unattractive biscuit. Why are his opinions so valid? Because they are different?

Business is about making a profit. Giving service at a reasonable price should create a profit. Those profits should be distributed to those who provide the capital and used to improve the service we receive.

Over the last 10 years, we have seen profitability fall and an unprecedented decline in service. Call centres with staff barely out of school answering the phones subject to a time management regime that is laughable in the extreme.

Jordan&#39s admission that running life assurance funds involving guarantees is a tough act is certainly refreshing – and not before time.

Perhaps now policyholders with guarantees will not only understand what they have got but will also appreciate it. It would be nice if journalists actually came to appreciate the finer “elements” as well.

Terence O&#39Halloran

Lincoln

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