Why the need for a review?
With-profits has changed so much since its heyday, so you should carry out reviews to make sure these investments are still the most suitable for your clients. For example, the average equity weighting of a with-profits life fund in 2000 was 66%* - compare that to the average in 2006, which was 39%*. Quite a difference, isn't there?
*Cazalet Consulting Ltd, Life 2006 report
Have a think about why your clients took out the with-profits bond in the first place and what their original aims were. Is their current with-profits bond still meeting their expectations? If not, do you feel comfortable explaining the reason why it's not to them?
If that's not reason enough to review, you also have the Financial Services Authority (FSA) issuing 10 questions it suggests with-profits investors should think about:
- What sort of policy do I have?
- Does the policy still meet my needs?
- How long have I had the policy and how long is left?
- What can I expect my policy to be worth if I keep it until it matures?
- What benefits does my policy have?
- What could I get if I cashed in my policy today?
- Is there any way I can cash in my policy without the company charging a surrender penalty?
- If I do cash in the policy, what should I do with the money?
- I've received a letter from my insurer saying I can switch to a unit-linked fund - should I?
- Should I move my money to another insurer?
The FSA gives some guidance to investors under each question. Take a look at exactly what they're saying. The FSA's 2005/06 report states that there's £427 billion of assets invested in with-profits funds, £95 billion of which is in closed funds. That's potentially a lot of money that could be wrongly invested.
The FSA has also warned that it will take supervisory or enforcement action, where appropriate, where it finds that with-profits customers aren't being treated fairly. This warning came as part of its Insurance Sector Briefing in May 2007. Follow the link to read the full briefing.
You can also watch Ned Cazalet talk about with-profits in our exclusive must-see series of three short video webcasts.
Our With-Profits Analyser can help you determine if your clients' with-profits bonds are still the most suitable investment for them.
With-Profits Analyser
Find out about our new With-Profits Analyser - a tool to help you determine whether your clients’ with-profits bonds are still the most suitable investment for them.
What Cazalet says
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