With Profits Investment | Investment Adviser | The Finance Zone.co.uk
It is quite amazing to me that the regulator, the Financial Services Authority, has allowed the biggest single sector of the UK investment market to end up in a big mess mess.
When considering With-Profits investments, and finding the correct advice via an Investment Adviser both as a concept and in reality, should be simple, however is often completely fudged by providers (Life Assurance Companies).
Despite the obligation for With-Profits providers to publish a PPFM (Principles and Practices of Financial Management) it is still often impossible to uncover all the relevant facts and figures. The PPFM documents themselves are often crammed with impassable terminology and detail and, like With-Profits in general, appear designed to make things as unclear as possible. It is also interesting to note that many Investment Advisers also still get it very wrong.
The approach of many With-Profits companies with regard to transparency is often nothing short of appalling, and is in direct conflict with the FSA’s “Treating Customers Fairly” initiative.
It is hard to believe that in the modern investment world With-Profits still plays such a large part. It is clear that the concept of With-Profits has been mis-sold, allowing Insurance Companies and their sales people to present With-Profits as something it is not (not all IFA’s are wholly innocent either). With-Profits has undoubtedly regularly been sold as a direct alternative to deposit accounts.
There remains somewhere in the region of £300 billion invested in With-Profits, many are trapped by redemption penalties (often called, MVR’s, MVA’s etc.) but the funds themselves continue to deliver appalling results.
However, a small minority of providers (Step forward – Prudential, Aviva, LV= and Wesleyan) have achieved positive and very acceptable results for their plan holders. These companies aren’t rocket scientists, they simply applied the original principles and benefits of with-profits, not chasing market trends and fashions, and investors with these companies are likely to be pleased with the results. Although there are another few companies who have achieved, at best, reasonable returns, somewhere in the region of 40% of all With-Profits investors are in funds that are doomed to underperform substantially in the future.
One of the many contradictions for With-Profit investors is that those in good plans with good companies, achieving good results, are likely to be in a position where redemption penalties (MVR’s, MVA’s, or some other element of the With-Profiits alphabet soup) do not apply, and they can move out of the fund quite easily. Sadly, this is another opportunity for the unscrupulous sales person to lump all With-profits funds under the same umbrella. In a nutshell, the poor funds usually have the highest penalties, the good funds often have no (or very low) penalties.
Yet another contradiction is that the good funds, with the best results, are usually those that have the highest asset allocations in shares and property which, ironically, makes them more vulnerable to market downturns and less suitable for the cautious investor that they are aimed at. Help !
If you have a With-Profits based investment, or are considering investing in one, take advice now and of course I will be pleased to help.
The reality is these investments are often not what they seem and there are a lot of lazy Financial Advisers out there that continue to use what in the modern world is clearly a little out of date.
Over here I pride myself on making sure that all investments fit completely with your overall Risk Profile and use an Independent System (that has been tested) in order to ensure my recommendations fit.
Richard Smith
0845 226 9106
You can contact me here
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