View more on these topics

Wesleyan grows on IFAs

Wesleyan Assurance

Wesleyan Growth Bond

Type: Capital protected bond

Aim: Growth linked to the performance of the Wesleyan Life Managed Fund

Minimum-maximum investment: 10,000-500,000

Term: Six years

Return: 100% of the growth in the Wesleyan Life Managed Fund

Guarantee: Original capital returned in full regardless of performance of the underlying fund

Closing date: December 31, 2004

Charges: Investments under 25,000 initial 10%, 25,000-50,000 initial 9%, above 50,000 initial 8%

Commission: Initial 6%, or Initial 3% plus renewal 0.5%

Tel: 0845 351 0148

Wesleyan Assurance has entered the IFA market with a capital-protected bond linked to the performance of the Wesleyan life managed fund over a six-year term.

Highclere Financial Services partner Alan Lakey believes structured products like this, which have a guaranteed return of capital, are essential to counter the negativity of the precipice bond scandal. However, he adds: “Interestingly, Wesleyan uses the word guarantee in its literature, something the FSA has historically frowned upon.”

Lakey points out that the bond is available until the end of the year and invests in Wesleyans well regarded managed fund. He says: “With a minimum investment of 10,000 and maximum of 500,000, it has a typical bond design.”

Lakey thinks the initial 3 per cent plus 0.5 per cent renewal commission option is typical for bonds, but he says the other option of initial 6 per cent and no renewal is far higher than the usual amount offered by guaranteed Isa competitors.

Looking at the negative features of the product Lakey says: ” The allocation rate is between 90 per cent and 92 per cent and over the six-year term this reduces 6 per cent annual growth to 3.2 per cent. Like all bonds this may be unsuitable for those likely to be high-rate taxpayers at maturity.”

Turning his attention to possible competitors Lakey says: “Investment bonds without the guarantee, but with the far higher allocation rates, are likely to provide the main competition. However, guaranteed Isas are likely to be more tax-efficient and lower charging.”

Summing up Lakey says: “While Weslayans investment prowess is respected, I feel that the high charges which result from the low allocation rates is a major deterrent. The managed fund will need to outperform the average by around 1.5 per cent a year to balance the effect of the allocation rates.”

BROKER RATINGS:

Suitability to market: Average
Investment strategy: Good
Charges: Poor
Adviser remuneration: Average

Overall: 6/10

Recommended

Digest

CML says Hips are nowhere near readyThe CML says home information packs are nowhere near ready for implementation and is calling on the Government to undertake a realistic assessment of the cost of Hips. The Government expects Hips to be available from January 2007.

Tech winners keep on winning

By Ali Unwin, chief technology officer & fund manager, Neptune Artificial intelligence, driverless cars, big data. As technological advancements – and disruption – increasingly dominate headlines, Ali Unwin sets out six key themes he is watching in 2017. Read more Important Information Investment risks Neptune funds may have a high historic volatility rating and past performance […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment