Tarnished with the same brush?

With Profits investments have been hit by a growing barrage of criticism in recent years some of which, it could be argued, is justified. That being said not all With Profit providers are the same so should they all be tarnished with the same brush? We think not.

The appeal of With Profits has faded in recent years largely due to stock market falls and concerns over transparency of the products. Issues such as terminal bonuses being removed and market value reductions being applied for transfers have made many investors become confused with regards the true value of their holdings.

But as we have already mentioned not all With Profit Providers are the same. Chartwell has recognised that an increasing number of clients are now seeking ways of investing cautiously.

These clients have typically come to this conclusion because:

• The low returns currently seen on deposit accounts are prompting further consideration as to the right home for money in the medium term.
• The recent levels of stockmarket volatility have led to a conclusion that ‘steady’ returns are now what they crave.

We continue to believe that anybody seeking direct exposure to the 'ups and downs' of market investing should consider collective funds such as Unit Trusts and OEICS as access to the best managers and the widest choice of funds comes from investing this way. However, straightforward collective funds can be of limited use for clients looking to re-assess their tolerance to investment risk and wishing to invest cautiously and with less cause for concern in the medium-term.

For those seeking superior returns to deposit accounts or wishing to control risk and volatility levels then we believe that a With Profits investment may now be relevant especially at the 'quality end' of this market. With Profits Funds need to be able to ‘practice what they preach’ in providing predictable and consistent returns.

Do we support all With Profit funds? The answer is obviously NO. What we do support is a fund that is operated by a provider who has an exemplary track record for managing and delivering predictable returns over time. We also support a With Profit Fund that has made an effort to remove the confusion regarding terminal bonuses and market value reductions making the investment much more transparent.

In this case we feel that the smoothing process accessible via the PruFund Cautious Fund, which invests in the Prudential With Profits Fund, offers the particular advantage of there being no Market Value Reductions.

Accessing a With Profits Fund whose value you can see immediately without an MVR being applied can only be seen as a positive step forward for a sector seeking to make itself heard.

Rob Hudson is a director at Chartwell Direct. The views expressed here are his own.