Research Shows IFAs Have Lost Confidence in With-Profits
Managing Partners NewsAugust 27th, 2008
Only 1% of IFAs have a very positive view on with-profits
New research from investment management company Managing Partners Limited (MPL), reveals that only 13% of IFAs have a positive view on with-profits based investments. More than three out of five (63%) of IFAs have a negative view, with one in four (25%) being very negative.
| View of with-profits based investments | Percentage of IFAs that share this view on with-profits based investments |
| Very positive | 1% |
| Positive | 12% |
| Neither | 20% |
| Quite negative | 38% |
| Very negative | 25% |
| Don’t know | 3% |
Jeremy Leach, Managing Director of MPL, said: “With-profits investments have been delivering very poor returns for some years now and the turbulence seen on financial markets over the last year will undermine those returns further. With-profits was once a major consideration in the advice offered by IFAs but now it is rapidly becoming a dead duck. Our research shows that only 19% of IFAs are now proactively recommending with-profits investments to their clients. But it is not that investors have lost their appetite for the steady, predictable returns that with-profits policies once offered, it is just that they are failing to deliver.”
A substantial majority (59%) of IFAs are proactively trying to find an alternative investment product that has many of the characteristics of with-profits investments, according to the research.
Investors looking for steady, predictable returns should consider investing in Traded Life Policies (TLPs). These are United States-issued life assurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime. TLPs are purchased at a discount from their maturity value, which in the majority of cases is fixed at outset, which means that they are guaranteed to rise in value. The TLP market has seen huge growth from $50m in 1990 to $20bn in 2007.
While TLPs carry the risk that it is unknown when the lives assured will die, the exact pay-outs are known so the key attraction of a TLP fund is that with the right diversification and actuarial analysis, they can be used to deliver steady, predictable returns.
For retail investors, MPL offers a GBP Growth share class in its Traded Policies Fund, which is a fully-regulated mutual fund that can be included in personal portfolio bonds, wraps and SIPPs. Launched in 2007, its first 12-month performance to 1 April 2008 was 9.62% on a bid-to-bid basis, while performance for the year to 1 July 2008 was 9.95%.