Whether or not it was down to over ambitious bonus rates in the late 90s, bad investment decisions, high charges, regulatory costs, long term liabilities or the requirement to meet free asset ratios, the simple fact is that with-profits bonds have been shown up for what they truly are and there are a lot of unhappy investors out there!
So, with the big insurers alarmed at the sight of a huge tranche of high profit underperforming investment walking out of the door, they have resorted to a number of measures to try and convince us all that with-profits really is good after all.
We have seen a concerted investment campaign through the trade press by one insurer. Some companies have held on to MVAs for as long as possible whilst others have brought long term guarantee dates to the attention of their investors.
In the case of the Prudential, they have even tried to accuse advisers of “churning” in cases where clients were being advised to switch out, and when that didn’t work the Pru started an offensive on fee-based advice!
But non of these methods have worked up to now, and so we now see that two insurers are concocting convoluted schemes which promise bonuses over the next 2-3 years. In some cases, the promise of future returns is linked to certain orphaned assets.
We could go into the scandal of how orphaned assets were distributed in the late 1990’s, with a large share being claimed by the insurer, and then the draconian application of market value adjustments which followed. But the fact is that these new “promises” for with-profits investors lack substance, represent “too little too late” and come on the back of several years where little or no bonus was declared.
This is just another attempt to lock the long suffering with-profit investor into their long suffering with-profits fund.
The fact is that investors now recognize these opaque, high charging, low performing investments for what they really are and no amount of bribes or promises will disguise the fact that with-profits investors have been badly let down.
For the insurance companies the writing is on the wall and the with-profits gravy train has left for good!
For the record, I would just add that I am not a poacher turned gamekeeper, Premier doesn’t recommend with-profits investments and never has.
Adrian Shandley is managing director of Premier Wealth Management.
The views expressed are those of the author and not those of the company he represents.IFAonline
Industry Voice: For generations, life expectancy has been steadily increasing, with more and more people now likely to live to 100.
Joined company in 2016
Bought ATS for £40m this morning
'Global ETF research centre'
Noise or noteworthy?