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What advisers are saying: Have bonds become a dirty word?

I don’t know whether it is the reassuring sight of Steve Bould on the touchline, two consecutive clean sheets or a heady mix of the two but some things just feel innately good.

There are certain sights, sounds and smells that are so deeply rooted in a time when all was well that even the most fleeting exposure to them transports you there. Take, for example, the phrase “up for grabs”. Its merest utterance will forevermore evoke the memory of “Thomas, charging through the midfield… it’s up for grabs now? Thomas! Right at the end!” Those immortal words, uttered by the commentator Brian Moore on the night of 26 May 1989 accompanied the most dramatic climax to an English League season. It was the moment when Michael Thomas wrote his name in Arsenal folklore. But I digress. It has been a while.

On the flipside, we can be subject to equally powerful negative anchors. For me, the smell of WH Smith rubbers and new satchel leather still carry with them a measure of back-to-school dread.

Similarly, bonds, I fear, have become rather a dirty word in some quarters. Beleaguered by bad press due to varying levels of misuse and abuse in the past, I suspect they are suffering, in part, from some deeply negative associations. Bond sales have fallen two-thirds since their high and many advisers have been dissuaded of their relevance by overzealous compliance assault courses which, perversely, canmake it too onerous to recommend appropriate solutions.

When it comes to a discussion of suitability in relation to investments, the investor’s attitude to risk and the resulting asset allocation model and choice of constituent funds and investments understandably takes centre stage. These choices affect outcomes. But so can wrapper choice. After the tax “no brainers” of registered pensions and Isas, in the retail space there is UK and offshore collectives and UK and offshore bonds.

Leaving aside the rights and wrongs of the coverage bonds have received, it cannot be denied that, on tax grounds at least, bonds (UK and Offshore) can deliver an effective outcome for a UK investor, particularly when there is a reasonable level of income produced by the portfolio and the investor is a higher or additional rate taxpayer looking for tax deferment.

That is not to say, of course, that bonds should always be the “wrapper of choice” but then nor should “unwrapped” collectives. It just depends. For some portfolios, a combination may work.

Phil Wickenden is the managing director of So Here’s The Plan

All quotes have been taken from interviews with QCF 4 qualified financial advisers from fee charging businesses.

Phil Wicke 6 Sep

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Comments

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  1. So, thinking this was a usefull article about Bonds and the current market, I plow through a load of rubbish about a football team, only to discover it’s not about Bonds at all, it’s a load of waffle about Investment Bond contracts!

    What a waste of time and space! Can you please train your contributors and sub editors to use correct terminology.

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