Jason Hollands, head of communications at F&C, says there is some evidence suggesting cross-selling of children's products is taking place on the back of CTF sales.
Figures from HM Revenue & Customs for the first year of the Child Trust Fund suggest about 75% of parents are putting their children’s vouchers into stakeholder options, 22% into cash, and 4% into non-stakeholder funds.
Hollands says that means the size of the non-stakeholder market remains small in the grand scheme of things. He believes one of the reasons for this is the lack of advice, but this is not surprising given how from a business perspective it simply does not add up to provide advice on the basis a £250 lump sum is to be invested.
F&C has specifically targeted a niche in the market of parents who are willing to put more in, and that is where the evidence of cross-selling is appearing.
“We’re well ahead of where we thought we’d be at this time,” Hollands says.
“We are experiencing a high ratio of top-ups – about three-quarters are topping up – and sales of our existing children’s savings scheme is up about three-fold.”
This is undoubtedly down to the fact many CTF-eligible account holders have older siblings who do not qualify under the rules, but whose parents see an option to invest in something similar, Hollands says.
“It’s clearly working to cross-sell other children’s products.”
F&C is still seeing about 30% of its CTF business going into the stakeholder, which it has to provide according to CTF rules in order to offer a non-stakeholder option.
This may change if there were more advice in the market, and Hollands sees that taking place in five or more years, when, following the second government sponsored voucher set for eligible account holders hitting their seventh birthdays, additional top-ups may take the value of CTF accounts over the £1,000 mark.
This is when it starts making business sense for advisers to start providing recommendations, which could warm up the switching market, and is the point when forming relationships with younger families now could pay off.
Hollands adds he is not sure about just how much cross- or up-selling is taking place involving products targeting adults as a result of forming relationships with CTF account holders, that is, the children.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Jonathan Boyd on 020 7484 9769 or email [email protected]IFAonline
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