Type: Unit linked bond
Aim: Growth by investing in a choice of 45 funds and seven managed portfolios
Minimum investment: Lump sum £15,000
Fund links: Choice of 45 funds and seven managed portfolios from Artemis, Baillie Gifford, Credit Suisse, Dresdner RCM, DWS, Exeter, Fidelity, First State, Gartmore, Investec, Invesco Perpetual, Jupiter, Liontrust, M&G, New Star, Newton, Norwich Union, Schroder, Threadneedle and Winterthur Life
Allocation rates: 100%
Charges: Annual up to 1.5%
Switches: Unlimited free switches
Commission: Subject to negotiation
Tel: 0845 1299993
Don Stewart, principal consultant, Donart Financial Consultants, Peter Pickup, principal, Peter Pickup IFA, John Hill, IFA, Positive Solutions, David Flowers, director, Ronald Blue & Co
Company's reputation 5.8
Past performance 6.5
Product literature 9.0
The investment bond is Winterthur Life's first multi-manager unit-linked bond. It provides investors with the choice of 45 internal and external funds and seven managed portfolios.
The panel assess how the bond fits into the market. Flowers says: "Very well - one of the main new business areas for the future." Stewart thinks its arrival broadens the horizons of onshore bonds. Pickup says: "It is a medium-to-long investment for either capital growth or income." Hill thinks it will fit in okay because more clients are looking to multi-fund investments to give flexibility.
Commenting on the type of client for whom the bond is suitable Pickup says: "Reasonably high-net-worth with a minimum of £15,000 to deposit, retired clients seeking to increase income and clients with cash to invest for a minimum of five years." Flowers thinks the charges will attract all clients, but the sophistication of the bond will be useful to high-net-worth clients too. Stewart suggests clients who "may be apprehensive about going offshore and those who wish to use a wide range of investment funds coupled with the tax advantages of annual 5 per cent withdrawals."
Next the panel discuss the marketing opportunities the bond will provide. Flowers says: "This bond will be a prime candidate for receiving funds from investment bond re-balancing exercises. It will also be good for general investment and tax planning investment." Pickup thinks it would be useful for clients with money to invest for the medium-to-long term. Stewart and Hill agree that it will provide opportunities for trustee investments.
Analysing the main useful features and strong points of the bond Pickup says: "There are no initial charges, no exit penalties, there is an excellent range of funds with a good choice of external fund managers, free switching and portfolio re-balancing." Stewart and Flowers like the fact up to four lives can be assured on the bond. Hill highlights that there is no fixed term.
The panel then bring the bond's drawbacks under the spotlight. Pickup says: "There are no guaranteed funds, no with-profits fund and no cat fund option." Stewart sees the maximum number of 99 policy clusters being a problem for larger investments in that it may not provide sufficient flexibility. Hill says the bond's disadvantages are: "The £15,000 minimum investment, and the competition have a wider choice of funds." Flowers cannot think of any negative points the bond might have.
Turning to the flexibility offered by the bond, Pickup thinks it is excellent. Flowers agrees and adds: "The structure allows for flexible investment, withdrawals, fund choice and switching." Stewart says: "Apart from the restriction on the number of policies to 99, I feel the flexibility offered is excellent."
Winterthur Life's reputation comes in for a mixed reception by the panel. Pickup says: "Most investors I deal with will not have heard of Winterthur Life and I have never sold a Winterthur Life product." Stewart says: "A quality office, although there have been some administration problems in the past. Hopefully those have now been resolved." Flowers echoes Stewart's comments about administration but adds: "As it brings its charges down, its products begin to stand out as good value."
Looking at Winterthur Life's past performance record Pickup says: "I was not aware of its past performance, but I am aware of most of the external fund managers' performance which has been good."
Flowers thinks past performance is not so important because the main thrust of the investment will be the use of multi-manager funds. "But will Winterthur Life pick the right funds going forward?" he says. Stewart thinks its past performance is reasonable adding: "This product has the added advantages of external funds and multi-manager funds." Hill thinks its record is mixed and it could do better.
Discussing the products that will provide the main competition to this bond, Hill suggests the products from Sterling, Skandia Life and Edinburgh Fund Managers. Pickup says: "Multi-fund companies offering with-profits bonds, Isas and unit trusts." Stewart says probably offshore bonds will provide the main threat. Flowers says: "The Scottish Widows flexible options bond specifically because of the Frank Russell link and Scottish Equitable for its offshore equivalent."
The panel next assess whether the charges are fair and reasonable. Flowers says: "Very. Possibly too cheap. How can it afford to run this service at such a low margin? The concern, if any, is that it will not be able to maintain the service levels." Pickup says definitely yes and Stewart agrees. However, he adds: "But there are additional expenses applied to some funds, which have not been specified. When it states 'no hidden charges' it is unfortunate that these extra charges are only available on application to Witherthur Life." Hill says they are fair but clients always want lower charges.
The panel then focus on the commission. Pickup thinks it is up to the adviser to determine the level of commission and this appeals to him. Stewart agrees, adding that the client can also help to determine the commission payable. Flowers is also in favour, saying it is great for fee-charging IFAs.
Coming round to the matter of the product literature the panel view it positively. Pickup thinks that overall it is very good. Hill says simply: "Brilliant." Stewart says: "Overall appearance is one of class. The content is good and easy to follow but it should have included expenses charges in the 'product charges and fund range' leaflet." Flowers agrees with Stewart. He says: "Superb. The best I have seen in new product literature for a long time. It has even gone to the extent of producing a short and a long proposal form. You can choose depending on how involved the application is going to be."
The panel sum the bond up. Flowers says: "This is one of the best new products to emerge for a while. In a financial services world where everything is changing and the pendulum is swinging toward the fee-based adviser, the presentation, flexibility and options within this product should make this one go platinum." Pickup says: "On the face of it the product seems excellent - charges are minimal and there is a good choice of external fund managers." Stewart feels it is an excellent product, well presented. He says: "My only reservation is that despite having a 'clear approach' and 'transparent charges', it has chosen not to publish the additional expenses charges associated with some of the funds." Hill says: "Add a few more funds and let's see how it goes."