Dave Ferguson of the Abacus, has his eye on Hartford Life, a UK insurer with a sensible number of well-balanced funds and portfolios
Having spent the last few months deriding the efforts of UK insurers to offer concise and well-planned fund ranges, I now find myself in the slightly uncomfortable position of praising the range of a company active in the UK market.
Whether a reflection of its heritage or simply a more focused approach, I find Hartford Life's stance on open architecture entirely refreshing. Not for it the pursuit of a gazillion funds with little or no meaningful strategy. Rather, The Hartford has set about creating a range of funds and associated portfolios that are based around a small number of quality fund management groups. Not only does The Hartford seem to have come up with a sensible number of funds, there is good balance about both the range of funds and the portfolios.
With a range that extends to Investec, New Star, Fidelity, Schroder, Invesco Perpetual, Invesco GT and BGI, the group has reached a sensible balance of choice and manageability.
I guess the real test for this proposition will occur when the time comes to revisit the fund range. It would be encouraging if The Hartford took a proactive approach to the incumbent funds rather than simply follow the well-worn path of adding on yet more funds.
In assessing the value of a life office-linked fund range one must consider that there are really only two areas in which the provider can add value to the customer proposition.
Firstly the company can contribute something in the methodology adopted to choose the fund providers. There are two ways a fund range can go - it can either seek to cover the entire worthwhile universe of collectives or it can seek to add value to the client proposition by taking away some of the work from the adviser and distil the universe down to a manageable group of funds. The Hartford has clearly chosen the latter route and I applaud its focus in this regard.
Whether others will follow its lead remains to be seen but I think in concluding that many advisers do not have the ability to analyse the whole market, The Hartford has stuck a valuable stake in the ground in relation to the construction of fund ranges on investment bond products.
Secondly and perhaps more critically, the life office can leverage its (sometimes potential) scale to drive down asset management margins on behalf of the client. Now while the downside is that this gain often evaporates once the providers' sales and marketing costs have been met, the principle is still valid. In the more general world of open architecture this is of course the end game and while I would prefer to see clients and advisers benefit, I can live with a trend that sees asset managers focus on core skills and living with a lower margin. In time the market will evolve such that advisers and their clients are able to source good quality asset management terms on semi-institutional terms - a significant improvement on the cartel-ish position that exists today.
The current position where providers negotiate with clients' money to secure better terms provides an indication of where the wrap market will really begin to add value to advisers. In addition to the obvious back office savings and greater openness the real economic gain for advisers will be provided by improved asset management terms.
Back to The Hartford. In addition to an attractive investment proposition The Hartford also allows clients to pay a premium for a safety net feature that will limit any potential loss that might result from falling capital markets. While this comes at a price and is structured unlike any other protection feature we have seen in the UK before now there is no doubt that it will appeal to some clients, particularly those approaching retirement or seeking an income from their bond.
So there you have it - I can't recall if this is the first good news piece for this column but in any event I hope that the message is getting through. To some at least. I note as I type that Norwich Union has just added 30 or so funds to its onshore bond. I look forward to the day when it adds something to the debate by removing a few funds because they are just not up to scratch. I'm not holding my breath.
The Abacus is a product design and strategic marketing consultancy that has worked with over 50 life offices, asset management groups and other industry bodies since creation in 1999.
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