Advisers put spotlight on investment bond providers

The financial strength of an investment bond provider is even more important for advisers than the underlying fund selection, according to a major new report by Capita Financial Software.

It showed the full extent of the impact of the global financial crisis on IFAs including concern about another major financial player going under.

The survey found 71% of 4,688 pieces of unit-linked investment bond research were targeted at the financial strength of the provider with the Insight tool offering provider ratings from S&P, Moody's and AKG.

Just over 90% of requests also wanted information on the type of contract available but this fell dramatically to 35% for extra details on underlying funds.

The asset allocation of unit-linked investment bonds shifted drastically throughout the year to take into account plummeting stock markets.

Over 2008, the two most common areas for investment bond research were Equity UK and Equity UK Income. The Corporate Bond sector was in third place with Real Estate in fourth and Money Market fifth.

However, on a monthly basis, the selection frequency of equity research more than halved during 2008 from 24.1% of requests in January to 10.7% in December. This fell even lower to 9.6% in February this year but was back up to 12.9% in March.

Requests for information on Money Market sectors stayed level throughout the year on 10%. However, there was a slight dip in December, perhaps reflecting concerns surrounding the sector following the news the Standard Life Sterling Pension fund had been devalued.

When it came to the most popular features for research, withdrawal options and frequencies dominated the top 20 features across all five bond types.

The report says: "The penalty free withdrawal allowance is clearly one of the key benefits of investment bonds, and the most popular withdrawal frequencies are, perhaps as expected, monthly and annual."

IFAs also acknowledged that unit-linked investment bonds require ongoing reviews by repeatedly seeking contracts that permit free switching.

Loyalty bonus were seen as commonly required features but IFAs were more interested in bonds that allow penalty-free surrenders.

The research showed written business over the year through the Insight Tool was: Conventional with-profit, £0.35m; Distribution, £9.82m; Protected benefits, £37.71m, Unit-linked; £183.09m and Unitised with-profit on £28.94m.

Investment bond research requests

Jan 08 Jun 08 Dec 08 March 09

UK Equity Sectors 24.1% 13.5% 10.7% 12.9%

Money Market Sectors 10.6% 9.3% 8.7% 9.5%