Insured funds - what is the point?
Given all the discussion around whether a SIPP is a real SIPP or not according to the investment selection and the now impending changes to the investment freedom of protected rights pensions, is it not time to abandon the ‘asset class’?
Surely the more strongly regulated and to a degree transparent unit trust and OEIC structures offer more appropriate havens for client money.
It strikes me that the entire concept of insured funds is a throwback to the even darker old days. After all there is seldom anything truly insured about them, it is just that they are priced and run by an insurance company.
To be honest, under TCF, I can’t help think that the expression is utterly confusing for investors and may serve only to mislead them into buying an asset they believe cannot fall in value. Now while some products such as onshore bonds can only invest in insured funds that is not a good reason to maintain the distinction.
Why not simply change the rules around such products to allow them to invest directly into mutual funds. Not only would such an approach remove swathes of cost from
the retail savings market (at least in the medium term) it would also allow much more accurate comparisons between funds and would encourage more transparent product pricing.
It is becoming increasingly accepted that the industry should move to a more transparent model, and while I wholeheartedly agree I am desperate to see a level playing field.
The ABI’s meandering ramblings on factory gate pricing contain some nuggets on the importance of accountability but disappointingly, in the main seem to point the finger squarely at financial advisers.
While I don’t think for one second that the advisory community should be immune from scrutiny, I see no reason why life offices, asset managers and platform providers should be exempt.
So throw away your mucky margins on dealing and cash holdings, kickbacks from asset management groups and get honest about what you’re charging for the service you are providing – it seems the only way forward to me. Removing the anomaly that is insured funds would be a good start.
David Ferguson is chief executive of Nucleus Financial.
The views expressed are those of the author and not those of the company he represents.Source: m.professionaladviser.com