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With-profits funds fall from favour as IFAs move towards TLPs, report finds

IFAs have switched allegiance from with-profits funds to traded life policies (TLPs), according to recent research.

By Gail Moss | Published Oct 12, 2009 | comments

The survey found that 78 per cent of IFAs would not proactively recommend clients to invest in with-profits products, but would rather recommend TLPs.

The survey, commissioned by Managing Partners Limited (MPL), also found a steady increase in the percentage of IFAs who are now familiar with TLPs, with the same number – 78 per cent – claiming knowledge of TLPs as investment products.

This represented an rise of more than 74 per cent last year in terms of the number of IFAs who said they were aware of the products.

The research is based on interviews with more than 200 financial advisers throughout the UK during June this year.

TLPs are US-issued whole of life policies sold to investors before they mature. Fund managers use them in diversified portfolios, coupled with actuarial analysis, to offer steady, incremental returns that are uncorrelated with other financial asset classes.

Jeremy Leach, managing director at MPL, said: "We have seen the favourability towards TLPs increase over the last two years, as with-profit investments fail to deliver positive returns for investors.

"TLPs offer steady, predictable returns that are uncorrelated with other asset classes, making them particularly attractive in periods of volatility."

Mr Leach said the popularity of TLPs was also related to the credit crunch.

"Two years ago, IFAs would have relied on a weighted balance between bonds, property and equities to deliver target returns for their clients, but this asset spread has not delivered because of the financial crisis.

"All three remain unpredictable and volatile, which has forced investors to familiarise themselves with alternative asset classes."

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