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Old 25-02-2009, 12:14 PM   #11
1animal1
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just to stick my 'ore' in here (unsure if this has been said already and sorry if it has), the with-profits endowment will not always be low just because we are having a low spell now, they employ an MVR/MVA to keep people in the fund (as most know) so that they can maintain the smoothing approach which smooths out the returns over the plans lifetime. Furthermore the main emphasis is on the final bonus (again as most know) and this is virtually impossible to predict before the plans end (hence why there are so many firms offering to purchase them).....most WP plans will have a very different final bonus, ie if you took your plan out in say Feb 1988, then someone taking the same plan in March 1988 will most likely not have the same final Bonus (it could be light years difference depending on which company your with).

All of this doesnt make your task easier, with-profits arent liked because of their lack of transparency, where one fund like Pru has given great final bonus's (easier to manipulate), you will notice it gives lower regular bonus's (cannot be withdrawn once applied)in general to compensate when compared against other funds, there are several ways of looking at this and various investment houses will document and plot their approach, neither being definitively correct.

end result - your call, i just would base any decision considering all the facts rather than just the current market conds and predicted values personally

to answer a query above UL and WP or to throw a curve ball....a unit linked with profit which most (maybe all) are nowadays

hope this helps but like i said, if its been said already i apologise

Last edited by 1animal1; 25-02-2009 at 12:20 PM.
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Old 25-02-2009, 01:09 PM   #12
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I think many people do not understand what With Profits is. It is not an asset allocation but a smoothing mechanism. Take 2 Companies for example - Prudential and say Scottish Mutual....(now owned by Abbey / Santander). If you have your money in the Pru you have an actively managed asset allocation - whereas if you are in the Scot Mut you are now holding primarily Fixed Interest. It is imperative you understand where the company you invest with is allocating before you make any decisions. A good IFA will be able to give you this advice.

But remember no two companies are the same - even though they go under the banner with profits.
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Old 25-02-2009, 01:26 PM   #13
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ah, they are all asset allocation funds internally, they simply smooth the returns so that you dont get 20% one year and -10% another by keeping returns back and issuing regular/final bonus's.... theres a few degrees of management so in effect its like any other fund but the returns that the consumer sees are dictated by the fund manager/committee/board. Scot mut may be fixed interests but these need active management otherwise the fund would slowly move across into cash when the FI's come to an end, with fixed interests the value lifts and falls depending on a number of factors (which i wont bore you with)....

with regards to new invests, an IFA can only go on basic info such as agency ratings, fund strength and quartile/decile performance amongst a few other things.... there are several x-ray tools on the market but nothing conclusive.... still better than an average person could do though - picking funds is a hard thing to do as your calling markets/assets etc, with profits throws in several other pawns which is why most IFA's hate them

hope this helps
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Old 25-02-2009, 01:35 PM   #14
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Parish,

If you only have 2 years to run, I would suggest contacting the provider (the insurance company, not the seller) and ask them what final bonus's similar funds are producing at the moment, unfortunately WP funds being so "non transparent" in terms of values are difficult to give advice on, but generally if the are producing decent bonus's now you could reasonably assume a similar bonus in 2 years time, if you surrender now, you will lose this bonus, so take this into account when deciding what to do.
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Old 25-02-2009, 02:49 PM   #15
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Quote:
Originally Posted by 1animal1 View Post
ah, they are all asset allocation funds internally, they simply smooth the returns so that you dont get 20% one year and -10% another by keeping returns back and issuing regular/final bonus's.... theres a few degrees of management so in effect its like any other fund but the returns that the consumer sees are dictated by the fund manager/committee/board. Scot mut may be fixed interests but these need active management otherwise the fund would slowly move across into cash when the FI's come to an end, with fixed interests the value lifts and falls depending on a number of factors (which i wont bore you with)....

with regards to new invests, an IFA can only go on basic info such as agency ratings, fund strength and quartile/decile performance amongst a few other things.... there are several x-ray tools on the market but nothing conclusive.... still better than an average person could do though - picking funds is a hard thing to do as your calling markets/assets etc, with profits throws in several other pawns which is why most IFA's hate them

hope this helps
I think you missed what I was trying to say - it is imperative that the IFA knows what the asset allocation of each WP fund is - so that he can make call on asset allocation regarding the whole portfolio.

Agency ratings are pretty feeble criteria to use for decision making - look how they have got so much wrong recently - AND wft is their motive when .they ask the company to pay for its own rating....madness. Past performance is no guide to future performance. If any IFA uses these two criteria for their judgement - they are waiting to be hung out to dry.

He has to first match the asset allocation required to meet a set objective married to the clients attitude to risk. Most IFAs have no idea ...so it is imperative that the investor uses one who specialises in this field.
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Old 25-02-2009, 02:58 PM   #16
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I have been doing valeting part time for a car salesman on a part-time basis. A few months ago, he approached me regarding the possibility of working for him full-time, not just doing valeting, but doing a bit of everything really. I have decided after 3 months to take him up on his offer, but now he has put the ball in my court again regarding money. Basically he wants me to consider what money I would need to live on, etc. and he will try to put together a package to meet my needs. At present Im 21 and live at home with my parents, but in the next 1-2 years I want to move into my own place. Basically I would like to know what costs I need to consider when having my own place, so that I can decide how much money I will need. Does anyone know of a checklist I could go through, or is it really something I should go and speak to a Financial Advisor about?
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Old 25-02-2009, 05:00 PM   #17
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Quote:
Originally Posted by Crockers View Post
I think you missed what I was trying to say - it is imperative that the IFA knows what the asset allocation of each WP fund is - so that he can make call on asset allocation regarding the whole portfolio.

Agency ratings are pretty feeble criteria to use for decision making - look how they have got so much wrong recently - AND wft is their motive when .they ask the company to pay for its own rating....madness. Past performance is no guide to future performance. If any IFA uses these two criteria for their judgement - they are waiting to be hung out to dry.

He has to first match the asset allocation required to meet a set objective married to the clients attitude to risk. Most IFAs have no idea ...so it is imperative that the investor uses one who specialises in this field.
apologies if i did miss your point....easy enough as can get quite complex depending on what your trying to acheive. With with-profits asset allocation isnt AS important as with normal funds and so the funds are chosen mainly via their strength given by both ratings agencies and the funds themselves, the advice isnt as clean as a normal transaction because you cannot wholly gauge how good a withprofit fund is.... you can gauge a normal fund but only to an extent of its history and future transactions.

I agree most agencies have gotten things wrong royally lately, unfortunately this is still one of the very few tools that an IFA can use to gauge what is suitable, this and various other things like capital stability etc etc, there are quite a few decent agencies out there AKG, S&P,OBSR to name just three, the art is using these and knowing how they rate the firms (this would be quite advanced for the average IFA)...... trouble with the IFA role is that they are advising on product suitability rather than future performance which is crystal ball stuff, this is why dicretionary management is more widely used now more than ever for larger funds

past performance is no guide....true....but its one of the only indicators they have.... obviously it wont form the sole reason to use a fund but if a fund has historically outperformed its peer group over say 5 years, how can you recommend a p**s poor 4th quartile fund over this??? you cant is the answer.... so to answer your comment, its a consideration amongst many others

The asset allocation IFA is someone that most will not have the funds to access, and then why would they when they could pay a Discretionary Asset Manager an extra 1% AMC..... id rather be using say williams de broe than my local highstreet IFA IF i had half mil sat in funds...

we're off topic now......
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Old 25-02-2009, 06:45 PM   #18
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Quote:
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Parish,

If you only have 2 years to run, I would suggest contacting the provider (the insurance company, not the seller) and ask them what final bonus's similar funds are producing at the moment, unfortunately WP funds being so "non transparent" in terms of values are difficult to give advice on, but generally if the are producing decent bonus's now you could reasonably assume a similar bonus in 2 years time, if you surrender now, you will lose this bonus, so take this into account when deciding what to do.
Thanks for that

Thing is though that the value of the plan seems to be plumetting now.

It's with Scottish Widows and matures Jan 2011. The target is £26,100. We pay in £75 per month (some of which is Life Cover and Living Cover).

value at 22/10/2006 - £13,310
value at 21/10/2007 - £15,117
value at 11/03/2008 - £14,043 (dunno why they started sending statements in Mar. rather than Oct.)

God only knows what it's worth now. The one that matures next month (with Phoenix, originally with Sun Alliance) had a target of £21,000 and is paying out less than £16,000.

So from where I'm standing, we may as well stand in the middle of town every month and give £75 to some random person and given what's been said above by yourself and others how the hell can I possibly make any informed decision about this?
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Old 25-02-2009, 06:54 PM   #19
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@1animal1, Crockers, et.al. All the info you've posted is pretty incomprehensible to me which just goes to prove that the Low Cost Endowments that were all the rage in the '80s and early '90s were the worst thing people could have invested in and millions are now paying the price.

Of course, the FSA is worse than useless as they are working in the interests of the companies, not the customers. The policies were mis-sold and they don't cease to have been mis-sold just because some arbitrary period of time has passed since some arbitrary date.

I know it's a cliché but I'm a lot older and a lot wiser now and if I'd known then what I know now.....
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Old 25-02-2009, 09:33 PM   #20
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Parish, hindsight is wonderful thing mate, obviously back then advice was given on the back of a postage stamp..... there are still things being sold today that will end up the 'endowment complaint ' of the future.....

also dont be fooled, the FSA seem to be working in the interests of the banks, stats i saw recently said that 97% of complaints came from bank advisers and 3% from IFA's... yet lots of whats planned works in the banks favour... good show!!

good luck with whatever you do with the endowment/s, isnt an easy decision
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