London, 11 July 2008: Life companies will have to change their business models as sales of Insurance Bonds fall in favour of Mutual Funds say advisers, in new research findings* from Fidelity FundsNetwork™.
The survey, conducted with over 230 advisers across the UK revealed that the vast majority (85%) of advisers believe that sales of Investment Bonds are set to decline, with nearly a quarter (24%) predicting this decline will be significant. By contrast, an almost equal number (86%) of advisers foresee a rise in the sale of Mutual Funds, with just over a fifth (21%) stating that sales will increase dramatically.
Against the backdrop of 2007 where unit-linked Insurance Bonds sales reached £15.9bn**, such a considerable swing in the favour of Mutual Funds would present something of a cross roads for life companies who have built a large part of their business around Insurance Bonds. In fact, nearly half of all advisers (48%) now believe that life companies will have to change their business models.
Paul Kennedy, Head of Trusts & Tax Planning Solutions, Fidelity FundsNetwork said: “The findings from our research demonstrate clearly that advisers understand the importance that tax wrapper allocation can have on the investor’s return and that both Insurance Bonds and Collectives must be considered.
“Based on our findings, the popularity of Insurance Bonds versus Collectives looks set to become more balanced from perhaps where it has been in recent years - a market which was dominated by Insurance Bonds. It seems that advisers do appreciate that Collectives are strongly back into the equation for tax wrapper selection.
“It cannot be said that the recent changes to CGT have made vast differences to the way that Insurance Bonds and Collectives are taxed but what is indisputable is that the recent changes appear to have acted as a catalyst. Advisers are now looking far more closely at the tax efficiency of wrappers and inevitably recognising that Insurance Bonds do not fit all and Collectives (indeed as they always did) have a bigger part to play.”
FIL Limited (“FIL”) and its subsidiary companies serve the major markets of the world by providing investment products and services to individuals and institutional investors outside the US. FIL Limited manages a total of £130.4 billion of assets***.
Notes to editors:
* Research conducted by Fidelity FundsNetwork with 232 advisers on the 2nd June 2008.
** Source: ABI Stats: Unit Linked Single Premium IFA/WoM sales numbers for 2007
***Source: Fidelity as at 31.03.08
FundsNetwork, Fidelity’s fund platform, was launched in June 2000. It offers advisers and their clients the ability to invest, manage and monitor their investments in one place, bringing them control, efficiency and new business opportunities. Assets as at 31.03.08 are those of FIL Limited.
