Old Mutual unveils DFM life assurance bond

Old Mutual unveils DFM life assurance bond

Old Mutual International, part of Old Mutual Wealth, has launched an international life assurance bond that is linked to a discretionary fund management service.

The European Wealth Bond, which uses investment knowledge from Old Mutual-owned Quilter Cheviot, aims to provide a tailored solution for clients wanting to access to more choice of assets through a discretionary fund manager (DFM).

It is available for clients who want a DFM to run the investment portfolio, which is linked to the bond.

Article continues after advert

According to Old Mutual, the offering gives customers access to a broader range of investment options than is usually permitted within a generic international portfolio bond in the UK, such as direct equities.

The international arm of Old Mutual hopes the European Wealth Bond will strengthen its high net worth offering in the UK.

As well as Quilter Cheviot, Steven Levin, chief executive of investment platforms at Old Mutual Wealth, will make other DFMs available through the bond to ensure advisers have choice.

Mr Levin said the firm is seeing strong demand from international advisers who want tailored solutions for their high net worth clients, adding the bond launch is a key step towards delivering enhanced value for clients.

“This is a great example of how Old Mutual International is working together with Quilter Cheviot to deliver compelling solutions to advisers and clients.”

Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton Wealth Management, said by linking to the DFM, Old Mutual might be trying to get round the UK personalised portfolio bond (PPB) rules.

“I am somewhat sceptical of the need for this service, because even if it works and does not fall foul of the PPB rules, the client can’t have a direct influence in the specific underlying holdings - more of a general guidance.

“In which case this is little better than the client selecting a collective investment that invests in the client’s preferred sector.”

Mr Gallacher said, if the new offering is not an attempt to get round the PPB rules and the DFM only invests in permitted assets, then he is “even less convinced” about the need for this new product.

One concern, he said, is it might be difficult to remove the chosen DFM, which means clients might have to encash the bond and reinvest elsewhere in order to switch DFMs, which would incur an unwanted tax event.

He also pointed out that the use of an offshore bond can result in an unwanted double taxation of UK dividends, because unless they are a non-taxpayer when they withdraw dividends from the bond, then they pay tax again on the dividend.

In 2013, Axa launched an offshore DFM bond called the Dublin-domiciled Delegation bond.