Money Management articles from February 2003

Money Management archives from February 2003

In defence of structured products; Bad press and another FSA warning has damaged structured products reputation. But Nicole Pedersen-McKinnon explains that they are not all the same and can be appropriate additions to portfolios.(Industry Overview)
February 1, 2003... The term structured products covers a plethora of very different investment arrangements. At one end of the spectrum there are high income bonds, at the other, capital secure products that pay a portion of the growth in an index. In between,...

Structured products in todays market; Structured products have changed radically since they were first introduced several years ago. But there is so much choice that, even though consumers can buy these products direct from newspaper advertisements, they really ought to take professional advi.(Industry Overview)
February 1, 2003... The current economic environment is without doubt a challenge for investment providers. Customers view building society returns as low and direct equity investment as risky. Despite low interest rates and higher stock market volatility, there...

Capital secure products; Investors need risk nothing to gain limited exposure to the stock market. Nicole Pedersen-McKinnon investigates.(Industry Overview)
February 1, 2003... Guaranteed equity bonds, structured products that pose absolutely no risk to capital but that pay growth dependent on the performance of an index or indices, offer a risk-free method of gaining exposure to stock markets. Risk-free, that is,...

Income or growth secure products; High income bonds offer attractive rates of income or growth, but capital return is not guaranteed. Nicole Pedersen-McKinnon weighs the risk against the reward.(Industry Overview)
February 1, 2003... Structured products that guarantee income or growth can contain many hidden nasties. In order to offer attractive headline rates and a degree of capital protection, all contain features that enable the investment banks that write them to...

Hybrid products; Poor stock market performance and the high cost of derivatives are forcing product providers to innovate. Nicole Pedersen-McKinnon assesses the new structures.(Industry Overview)
February 1, 2003... The previous two features dealt with the two main types of structured products: capital secure and income or growth secure. Just to complicate the issue, there are now many more. In the perennial quest for high headline rates, providers are...

Successful investment management; Now that the magic of with profits has been exposed by bear markets, Jon Sadler of AIG Life explores the use of structured investment funds as a tool for satisfying clients somewhat diminished appetite for risk.(Industry Overview)
February 1, 2003... With interest rates pegged and stock markets expected to remain crab like over the medium term, investing for either income or growth is likely to remain a nerve wracking experience for investors still shaken and sapped of confidence by recent...

What to look out for; Structured products come in several versions and choosing the right one to match specific client needs is vital. Stephanie Spicer looks at which features IFAs should look out for, and which to avoid.(Industry Overview)
February 1, 2003... Optimistic investors chary of stock market investments are looking for certainty where they can. But structured products can be complex. The investor needs to be very sure exactly what is protected and at what cost to their capital is any...

A look at the indices; Structured products are linked to a variety of indices. Which ones are best? asks Simon Pistell, retail investments director of Legal & General.
February 1, 2003... Anyone investing in equities or equity related products in the 1990s could arguably be forgiven for thinking that equity investment was a one way bet. All you had to do was select from any one of a number of investment products and wait until...

Look whos talking; Good communications can help ensure the success of an employers pension arrangements and bad communications can guarantee their failure. Ian Naismith, head of marketing and sales technical at Scottish Widows, analyses the changing regulatory requirements.
February 1, 2003... There is no substitute for effective communication. Lack of understanding leads to suspicion and failure to take appropriate action. And this is nowhere more true than in pensions. Most employees do not understand pensions, do not know what...

Suitable only for a minority; Advisers may feel they are on a hiding to nothing when it comes to contracting out. Ian Naismith, head of marketing and sales technical at Scottish Widows, explains why the system only benefits a minority of scheme members.(Industry Overview)
February 1, 2003... Contracting out is fundamentally simple. A pension guaranteed by the State is given up in exchange for one that is subject to the vagaries of the markets. If the prospective gain from contracting out is high enough to justify the risk, the...

When group schemes get personal; With the Governments Green Paper proposing to offer pensions advice to company scheme members, the standard of best practice for employers is going to increase again. Will Hadfield looks at how fast the pension providers are moving to meet the financial.(Industry Overview)
February 1, 2003... Company pension schemes never used to be about treating employees as individuals. Final salary schemes were notoriously slow to provide their members with any information at all. The recent closures of final salary schemes by ASW and...

Resolving complaints; Having communicated well, sorted out contracting out and dealt with investments, hopefully everything will run smoothly. But what if something goes wrong? Ian Naismith, head of marketing and sales technical at Scottish Widows, considers how members can co.(Industry Overview)
February 1, 2003... It has happened to everyone. Something that looked wonderful on the wrapper does not work when it is unwrapped. What are the options? A refund? An exchange? Or at least a repair? With a pension, those who become disillusioned cannot get...

Brown tries to pass the very hot pensions potato; The Government is so petrified of unpopularity from actions like raising the retirement age that the Pensions Green Paper pushes such remedies to at least five years away. Conceivably winning the election after next, the Tories could then face an ever dee.(Industry Overview)
February 1, 2003... Most disconcerting is the regular use of spin in the Green Paper lauding of crumbling arrangements, claims that do not stand up, playing down awkward developments, rejection of inconvenient market realities, repetition of outrageous statements,...

Taking STOCK; Masterly inactivity once saved the Roman Republic, and it can do the same for personal wealth says former investment banker Russell Taylor.(Industry Overview)
February 1, 2003... Readers should study the accompanying graph closely, for it is not only Ian Rushbrooks record as an investment manager, but a vindication of his views. These are to concentrate on portfolio performance by attempting to identify the major tides...

Difficult customers?(trends in mortgage lending discussed)(Industry Overview)
February 1, 2003... For every action, so we are told, there has to be an equal and opposite reaction. And so it is in the world of mortgage lending. The introduction of systems aiming to simplify the process for most people has conversely made the process more...

CASH PLANS MAKE A COMEBACK; Healthcare cash plans are back in the mainstream. Helen Pridham examines their growing popularity.(Industry Overview)
February 1, 2003... Health is high up on most peoples list of priorities nowadays. This has led to a growing interest in cash plans which pay benefits toward various healthcare costs, such as optical and dental bills. The appeal of cash plans to consumers is...

THE PENSIONS GREEN PAPER; The Green Paper on pensions has been greeted with a chorus of complaints that it has failed to propose sufficiently radical solutions to address the pensions crisis. But it does offer exciting opportunities to the financial services industry, not least th.(Industry Overview)
February 1, 2003... Much of the criticism levelled at the Green Paper is justified, but the dramatic change that it could bring about, and the potential that it offers for the industry to increase sales of pensions products, have been overlooked. In reality, the...

SATISFACTION GUARANTEED; Dont mistake guaranteed income and growth bonds for structured products. These bonds really do offer guaranteed return of capital plus guaranteed income payments or growth too. Jon Cudby looks at what they have to offer.(Industry Overview)
February 1, 2003... Guaranteed income and growth bonds (GIBs and GGBs) have long been a dependable cornerstone of the investment market, but they can be overlooked by investors willing to take risks in search of higher returns. Although the returns available from...

PII ASAP or IFAs RIP; PI insurers are refusing to cover many IFAs, who stand to lose authorisation as a result. Its time that the FSA abandoned the Nero approach to crisis management and found a way out of this mess, says Debbie Harrison.(professional indemnity insurance; Financial Services Authoritys)(Industry Overview)
February 1, 2003... It is hard to keep the emotion out of the professional indemnity insurance (PII) debate. This is particularly so when your firm faces a visit from the Financial Services Authoritys (FSA) enforcement squad because you have been unable to find...

GETTING SAVVY WITH SSASs.(Small self administered schemes)(Industry Overview)
February 1, 2003... Small self administered schemes (SSASs) are facing troubled times. Spiralling costs due to the increased burden of regulation have caused SSAS administrators to increase their fees substantially on the one hand and many others to merge or pull...

SEEING THE FUTURE; Although there is much debate whether past performance should be used as a guide to choosing an investment for the future, human nature means that it invariably is. John Chapman looks at whether past good performance does, in fact, offer any help in choos.(Industry Overview)
February 1, 2003... The debate about past performance is like a never ending tug of war, with one side gaining inches only to lose them subsequently. Yet there must be some lessons from past experience. They might, for example, concern the effects of market...

INVESTMENT TRUST PENSION JOINT VENTURE.(Henderson and Alliance Trust in joint venture)(Brief Article)
February 1, 2003... Henderson and Alliance Trust have joined forces to launch a low cost SIPP designed to be competitive with stakeholder. The plan is invested in the Henderson-run City of London trust (UK Growth and income) and the Alliance Trust (Global Growth)....

A CURIOUS BEAST.(Zurich launches internal fund of funds)(Brief Article)
February 1, 2003... It is such a simple idea that it is a wonder nobody thought of it before. Zurich has launched an internal fund of funds that will never fall below 80% of the previous highest value of the product. It invests in three existing funds managed...

Multi currency.(Seven Investment Management launches white-labelled multi-currency wrap account)(Brief Article)
February 1, 2003... The first white-labelled multi-currency wrap account in this time zone is being launched by Seven Investment Management. All fund management and stock picking decisions are outsourced to four segregated mandates run by institutional fund...

Aim is 8% return.(Friends Provident International launches property fund)(Brief Article)
February 1, 2003... Friends Provident International (FPI) has added a commercial property fund to its single premium bond range. The Glanmore Property Fund, which will be managed by Thesis Asset Management, is available through seven FPI products, the main one...

New stars return.(New Star launches Managed Distribution fund)(Brief Article)
February 1, 2003... New Star is launching a new unit trust, the Managed Distribution fund, which aims to produce an income yield of 5%. The trust will become available on 10 February with a 1% discount to the 5% initial charge on lump sum investments, or PEP or...

Investment-linked newcomer.(Clerical Medical launches product with choice of 21 funds)(Brief Article)
February 1, 2003... Clerical Medical is moving into the investment-linked annuity market with only the second product that offers access to internally managed unit-linked funds and a with profits fund at the same time. The new product has a choice of 21 funds...

Viva viaticals.(Shepherds introduces dollar denominated fund)(Brief Article)
February 1, 2003... TEP specialist Shepherds has launched a dollar denominated fund of 1,000 US primary viatical settlement policies. These are life insurance contracts where the policyholders life expectancy is 36 48 months and therefore need to realise the cash....

A plethora of products; Asset managers pin hopes on new funds.(new ISA fund launches)
February 1, 2003... The ISA season has kicked off with a bang, despite sluggish market sentiment. New fund launches this month come from Fidelity, DWS, Cazenove Fund Management (CFM), Legg Mason and SG Asset Management (SGAM). The Fidelity Global Focus...

LETTER OF THE MONTH: Under PI pressure.(Letter to the Editor)
February 1, 2003... Please continue pressurising Sir Howard Davies over the archaic rules relating to PI. As someone who prefers to remain well below the parapet and who has kept his nose clean through all the traumas of recent years, I find it quite...

Times of regulatory terrorism.(Letter to the Editor)
February 1, 2003... My sympathies to Harry Katz at Norwest Consultants over his problems with renewing his PI cover. He must be one of those "recidivist firms with a history" to which David Cliffe of the FSA is quoted as having referred. Setting aside the quite...

Infamy, infamy.(Letter to the Editor)
February 1, 2003... I was reading your comment in Decembers edition on PI insurance and was reflecting how the market has changed. Focus is once again on the insurance market and the underwriters disinterest in new or extended risk at a time when they have no...

Warrants workshops; Free to IFAs.(Money Management, TradingLab offer workshops on covered warrants)(Brief Article)
February 1, 2003... Money Management has joined forces with TradingLab to offer a series of workshops on covered warrants. The workshops start at 8am and end at 10.30 am, providing maximum information with minimum interruption to the busy working day. The...

PMI in the public eye.(income protection insurance subject of ABI consultation period)(Brief Article)
February 1, 2003... Income protection insurance is the latest product that the regulator has determined to shoehorn into the public conscience. The ABI has entered into a consultation period, involving the FSA, Office of Fair Trading, Financial Ombudsman Service...

OCCUPATIONAL PENSION GUIDE.(Friends Provident publishes guide)(Brief Article)
February 1, 2003... Friends Provident has published a timely four part guide to restructuring an occupational pension scheme. The guide aims to provide advisers, trustees and employers with details of the requirements for discharging members liabilities, amending,...

Setting the Standard; THE fund management awards event.(Standard & Poors fund awards to take place in London on 27 February 2003)(Brief Article)
February 1, 2003... Preparations are well under way for the 13th annual Standard & Poors fund awards in association with Money Management, which will take place at the Dorchester in London on 27 February 2003. The awards, the longest running in the investment...

Revamped OPRA could not stop return of Capn Bob; Proposed reforms do not extend to unlawful acts before 1997.(Occupational Pensions Regulatory Authority)(Brief Article)
February 1, 2003... The new pro-active pensions regulator envisaged by the Governments Green Paper would not be able to stop Robert Maxwell from acting as a pension scheme trustee, were he still alive today. The revamped version of OPRA, which was dubbed the...

Redundancy is not retirement; Benefits saved.(Massey-Ferguson (United Kingdom) Ltd. lawsuit)(Brief Article)
February 1, 2003... The HIGH COURT HAS RULED that workers at the closing Massey Ferguson tractor plant in Coventry were entitled to full pension rights. The small print in the companys final salary scheme stipulated that the pensions of those retiring after the...

Money back annuity proposals fall short; Age 75 limit in advice confusion.(Inland Revenue)(Brief Article)
February 1, 2003... The Inland Revenues proposal to allow value protected annuities but to only permit balancing payments up until age 75 has just added to the complexity of the system, according to Mary Pitt, annuity market manager for Norwich Union. Both...

Tax crackdown; Life offices hit.(insurance fund taxation)(Brief Article)
February 1, 2003... The insurance industry is awaiting draft legislation to determine whether underhanded changes to the taxation of insurance funds will have a detrimental effect on solvency. Hugh von Bergen, a partner in KPMGs insurance taxation division,...

Reversion plans U-turn; Treasury ready to regulate.(reverse mortgage law)(Brief Article)
February 1, 2003... In an unprecedented change of heart, the Treasury has announced that it would consider regulating home reversion plans. Previously the Government had been adamant that there was no need to regulate these plans. But in a volte-face, the...

Carry back deadline looms.(Brief Article)
February 1, 2003... There are just a few days remaining to mop up unused pension contributions from the 2001/2002 tax year. Clients who did not pay the maximum last year can carry back a contribution made today, up until 31 January 2003. Those who have become...

Natwest enters self-cert market.(National Westminster Bank PLC introduces mortgage products)(Brief Article)
February 1, 2003... Natwest is targeting intermediaries in a bid to claim a share of the GBP11bn non-standard mortgage market. It will initially use only this channel to distribute five new self-certification mortgage products. Rates on the products start at 4.65%...

ISA reprieve.(maxi and mini Individual Savings Accounts investors reprieved)(Brief Article)
February 1, 2003... Investors who opened both a maxi and mini ISA in the same year have been let off. Both can now be kept open if taken out after 6 April 2001, but only if total contributions do not exceed the GBP7,000 annual limit. The tax relief received prior...

New split rules.(company directors )(Brief Article)
February 1, 2003... The FSA is to clampdown on splits. Under proposals outlined in a consultation paper, directors of investment companies will no longer be able to sit on the boards of investment trusts managed by the same investment house. Greater disclosure and...

Pension pushing.(Brief Article)
February 1, 2003... The Government has urged employers to include details of company pension schemes within job adverts. It has also called for more detailed information on contributions to be featured on payslips so that employees can plan better for their...

FSA takes action on PI; But is it too late?(Financial Services Authority; insuring independent financial advisers)(Brief Article)
February 1, 2003... The FSA may take the drastic step of doing away with PI altogether in favour of self insurance or establishing an industry mutual scheme that would see life offices bailing out IFAs that are struggling to find cover. Spokesman David Cliffe...

Katz fighting against being put out.(sole independent adviser Harry Katz)(Brief Article)
February 1, 2003... Harry Katz is a sole trader who is struggling to find cover. All attempts to renew his policy have met with dead ends from liability insurers and the FSA alike. Since first experiencing problems, Katz has sought guidance from the...

With profits payouts slashed; Bonuses under threat.(Brief Article)
February 1, 2003... Bonuses on with profit funds can no longer be taken for granted. Britannic has divulged that it might not pay any reversionary bonus this year, while Norwich Union (NU) has axed terminal bonuses on its 10 year Commercial Union and CGNU with...

Save as you learn; Finance class.(Personal Finance Education Group; personal finance learning in schools)(Brief Article)
February 1, 2003... The Personal Finance Education Group (PFEG) has celebrated the first anniversary of its Excellence and Access programme, which encourages the teaching of personal finance in schools. The scheme has seen 400 schools embrace personal finance,...

Age 75 rule to go for plans in drawdown.(pension funds and annuities)
February 1, 2003... Pension policyholders who put their funds in drawdown will no longer have to buy an annuity at age 75. The much-hated age 75 rule, which has remained unchanged on the statute book since the 1920s, will be effectively scrapped for pension funds...

Green Paper a bid to drum up support for stakeholder; AVCs, SSASs and SIPPs will suffer.(pensions)(additional voluntary contributions, Small Self Administered Schemes, Self Invested Personal Pensions)(Brief Article)
February 1, 2003... Proposals unveiled in the Green Paper and Inland Revenue review of pension taxation will promote stakeholder pensions at the expense of self invested schemes and additional voluntary contributions (AVCs). The abolition of income ceilings on...

100% kids mutual.(Tunbridge Wells promotes children's savings accounts)(Brief Article)
February 1, 2003... Tunbridge Wells has become The Childrens Mutual in a bid to leverage its hold on the child savings market. The mutual says that four out of five parents do not save for their children. Its Childrens Portfolio is a new concept that allows for...

Qualified success.(mortgage advisers gain qualifications )(Brief Article)
February 1, 2003... Nearly 51,000 of the 55,000 mortgage advisers have gained qualifications to continue practising, according to to MCCB figures. To be able to give unsupervised advice, they had to pass by New Years Day. Despite having two years warning, 31 left...

COMMENT:Staring them in the face.(stakeholder pensions)(Editorial)
February 1, 2003... Back in 2000 when the 1% charge cap was first introduced for stakeholder pensions, providers and advisers alike said that it couldnt work. It made margins just too tight for providers to offer the product and pay advisers too. They are now...