standard life

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I found IFAs were divided on this rollover (attempted windfall preservation) trick.

One IFA friend advised me against investing in the Standard WP Bond because it did not have any MVR free exit dates e.g. after 5 or 10 years. He did not recommend it to any of his clients. That now looks sound advice.

Another [cautious investor] family friend was advised to invest in one of these products by her IFA in 2001 and she is subject to a chunky MVR. To try to keep her happy, this IFA has been quoting some "interesting" possible windfall figures that would not be out of place in Alice in Wonderland .

But Standard Life were offering IFAs 7% commissions on the WP Bond product at one stage [in the three months from September 2003 as they desperately sought to prop up with profits investment].

Fast forward to 2005 and we find a different songsheet:-

Link to the Sunday Telegraph - Standard Life's new man Trevor Matthews launches a war on up front commissions :T :beer:

"Standard Life has called on the savings industry to ditch upfront commission payments because they disadvantage consumers and distort the market."

IFAs have liked Standard for many [other] very justifiable reasons in the past, including service and investment performance. They voted it "company of the year" six years on the trot to the end of 2003.

Link to Scotland on Sunday - Their "Barfly" was utterly astonished

BTW I expect that windfalls will be calculated in carnet's case using a membership date from 2002. But AFAIK Standard Life has yet to pronounce on this issue, which affects quite a few members.

It is very important, for investors and IFAs, that the demutualisation goes off successfully and Standard succeeds in raising capital, increasing profits and paying out a worthwhile windfall in a fair distribution.

carnet

Reporter wrote:

I found IFAs were divided on this rollover (attempted windfall preservation) trick.

I wouldn't describe it as "attempted" (or a "trick" for that matter ). It is a well established strategy which has been confirmed by SLAC itself and used by many WP policyholders in the last few years. Of course it is a calculated risk and requires forethought and some degree of prior knowledge (see below).


But Standard Life were offering IFAs 7% commissions on the WP Bond product at one stage [in the three months from September 2003 as they desperately sought to prop up with profits investment].

Yes, and by using a discount broker who gave up practically all their initial commission, plus the normal SLAC enhancement the "investment content" of our WP Bond was increased by some 8.42% .

BTW I expect that windfalls will be calculated in carnet's case using a membership date from 2002. But AFAIK Standard Life has yet to pronounce on this issue, which affects quite a few members.

Yes, it is also well known, and has, some time ago, been confirmed by SLAC itself in writing, that membership (seniority) ceases on maturity of a WP policy and begins afresh on the date the WP Bond starts, even when these occur on the same date .

As we already have an ongoing WP policy with SLAC started in 1983 with me as the first named, the rollover was done, after much consideration and calculation, purely to preserve Mrs carnet's right to the basic windfall for loss of voting rights plus, hopefully, some variable element. The Bond is currently showing a profit of some 11% (in just under 3 years). Factor in the windfall and it should show a better than average return over the period of just over 4 years (if all goes as planned ).

ReportInvestor

Nice work on getting the maximum into the bond and good luck with the windfall. The rebated commission sounds critical to your eventual success.

In June 2002 a windfall was nothing like as likely as it is now (Standard Life still had a few more billion quid to squander before management was forced to change course). That was what I meant by "attempted windfall preservation trick" - but it should have been better phrased.

Thanks for your hard information about the membership status of those who "rolled over" :beer: .

EdInvestor

Carnet

Looks like good timing all round.

Fingers crossed the current lot can do a good job 'turning round the supertanker', and the markets are on form at the appropriate time.

So far so good :beer:

dunstonh

The last SL WP bond i did in Oct 2003 has no MVR and has some TB. So timing is all important.

But Standard Life were offering IFAs 7% commissions on the WP Bond product at one stage [in the three months from September 2003 as they desperately sought to prop up with profits investment].

Thats about the going rate for full initial commission on bonds. Personally, I don't take that but many IFAs do. Particulary those employed IFAs or those attached to firms who take upto 70% of the commmission, leaving the IFA with little.

SL bonds were quite popular as they had no exit penalties and with the initial commission reduced, you could put someone in them with no charges deducted and with no exit penalty. SL reduction in yield due to charges was one of the lowest at the time as well.

From a personal point of view, I find Standard Life's service is excellent. However, at this time, there is little in their current product range that I find worth recommending. Annuities and life cover seem to be the only places that I seem to use them nowadays, which is an awful shame.

Another personal view is that I would not invest money into a weak investment on the off chance that I would get a potential windfall in the future. Its just folly and you may lose more than you gain. Look at all those NPI carpet baggers now.

carnet

dunstonh wrote:

So timing is all important.
Look at all those NPI carpet baggers now.

I was one of those NPI carpetbaggers (as well as all the other DM'd Life Offices, on each of which I have made a nice profit - given the percentage gain over the period of the "investment" - except, of course, ELAS where the loss was relatively small ).

I "invested" the minimum £2000 into the NPI Balanced Bond (with the max. in the WP element) in 1997. This only actually cost me £1920 as I got 4% cashback from the discount broker .

When they DM'd just over 2 years later I got £312.59 windfall plus I made a gain of £357.11 on the Bond itself for a total profit of £669.70 (or almost 35%).

As you say, timing is everything - and I very much doubt that many (if any) true carpetbaggers held on to their policies for any length of time after DM (especially with NPI ) .

EdInvestor

HI DH

As you say timing is all important - what timing are we talking about here?
Clearly before September 2002. :rolleyes:

SL bonds were quite popular as with the initial commission reduced, you could put someone in them with no charges deducted and with no exit penalty

Most people who bought SL bonds are now trapped because unlike those at other companies they have no anniversary date when you can exit without paying an MVR

dunstonh

what timing are we talking about here?
Clearly before September 2002.

My assumption is that the SL rep meant 2003 and not 2002.

Most people who bought SL bonds are now trapped because unlike those at other companies they have no anniversary date when you can exit without paying an MVR

SL bonds have a range of funds available to them and not everyone investing in an SL bond will be in the with profits fund. So its those in the WP fund that are trapped, not those in the other funds through the same product. (small clarification but quite important if somoene reads it and gets the wrong idea)

ReportInvestor

dunstonh wrote:

[7%] Thats about the going rate for full initial commission on bonds. Personally, I don't take that but many IFAs do. Particulary those employed IFAs or those attached to firms who take upto 70% of the commmission, leaving the IFA with little.

It's not quite correct to say that 7% is "about the going rate for commission on bonds".

Investors' Association link to Financial Mail - September 2003

".....Last week, a Standard Life executive sent memos to advisers saying that 'at Standard Life we are seeking to offer support to the financial adviser community for with-profits in general'.

It went on: 'We are seeking to raise the profile of with-profits bonds... and we are, for a three month period, offering 7% commission on with-profits bonds.'

This level of commission is unusually high and, one way or another, you can be sure that policyholders will pay. In the memo, Standard Life says nothing about the benefits of the bond or its suitability for advisers' clients. All it does is dangle the dough......"

7% commission was less of an issue to investors in the days when that was less than one year's investment return, rather than the current two year's return. But high initial commissions led to so many of our misselling problems - I'm not thinking of IFAs here, but of product designers and their bosses.

dunstonh

It's not quite correct to say that 7% is "about the going rate for commission on bonds".

That article is correct in fact in part but got the context all wrong. 7% (with no trail) was the going rate and still is. Standard Life actually used to pay 6.25% but increased it to 7% for that period. This made them in line with the other major players. Their commission has falled back a bit since.

Its not uncommon for providers to offer commission enhancements for limited periods when they want to drum up more business.