Hiding lights under bushels

March 11, 2008 | posted by Chris Johnston in Insight, Investment | comments (0) |

The investment industry is awash with statistics on fund performance. If you want to know how a fund has performed over three months, six months, one year, five years or ten years, the information is readily available. While past performance is not a guide to future performance, it is another part of the fund’s jigsaw of information that helps complete the picture along with asset allocation, fund manager details, investment policy and the like.

The situation radically changes though if you are interested in investing for income and you set about finding out how much a fund has paid out in the recent past. Now the position changes from the historical performance of the accumulation fund to the future expectation of distribution of the income fund.

If past performance is not necessarily a guide to future performance, how can expected performance be a guide to actual performance?  And what is the point of showing fund performance figures that include the very distributions that people seeking to compare income funds want to identify? 

Performance figures would make some small sense to people who want information about income distributions if they were stripped of the income reinvestment element of the performance. At least the claims of funds who say they aim to pay a reasonable income while at the same time delivering asset growth could be tested.

Investing for income appears to carry the same health warning that investing anywhere else does. Do your own research about the fund composition, management style and future likely economic conditions and come to your own conclusions.

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High profile group SIPPs - who’ll be choosing the funds?

March 7, 2008 | posted by Matthew Ward in Insight, Investment, Pensions | comments (0) |

News of the recent adoption of a Group SIPP proposition by one of the larger employers in the UK, GlaxoSmithKline, will have been music to the ears for providers of these money purchase pension solutions. We predict that this will spark more activity with regards to the inclusion of these schemes within employee benefit packages, especially as the decline in final salary schemes continues. Similarly providers buoyed by the appeal and success of individual SIPP products will be keen to ‘spread the love’ into the group market. 

Although Group SIPP is being touted by some to be the new heir to the throne in the group pension market we think that due to the array of investment solutions available it is more likely to suit the needs of a small percentage of the workforce such as key personnel and directors.  As such it may very well emerge as a successful top-up scheme solution which can be run in tandem with a Group Stakeholder or Group Personal pension scheme. 

The major decision point for the employer when appraising money purchase scheme options will be around getting access to manageable and sound investment propositions and hence this is where development focus in the market is likely to be. It is a well known fact that employees will often not want or be able to make a decision on which funds to utilise, especially where no advice or guidance is available, meaning that default funds are regularly used. Therefore the discussion around the number of funds or asset types available can often be a futile one.

As far as Group SIPPs are concerned if the employee struggled to select investment funds from a choice of 30 to 40 funds previously, how will they choose from a platform of over 1,000 funds? 

In light of these issues an interesting development which may occur, mirroring its success in the individual SIPP market, will be for providers to offer access to specialist Discretionary Fund Management links through the Group SIPP. This could provide a ‘win-win’ situation where the employer will be comforted by the fact that they are de-risking themselves from investment decision making, the employee will not be inclined to pick from a list of funds and the DFM will be able to professionally design and run large portfolios which can be linked to employee goal targeting and attitude to risk.

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Defaqto’s Star Ratings an Industry Success

February 29, 2008 | posted by Luci Mylward in Banking, Credit Cards, Current Accounts, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto’s Star Ratings for 2008 have been more widely adopted by providers than ever before. The ratings, which have become the most authoritative and impartial guide to product quality available, cover products in the banking, protection, investment, pension and general insurance areasIn January Defaqto undertook the huge task of analysing the quality of just under 2,200 products in 24 separate product areas from 550 different suppliers. Defaqto used a set of quality criteria to assess each product in each particular area. From this analysis Defaqto was able to score each product and then assign it a Star Rating.  The ratings ranged from five stars down to one star.

In total Defaqto assigned 252 Five Star ratings, 360 Four Stars, 571 Three Stars, 498 Two Stars and 511 One Star.

Defaqto licenses companies to use the rating in their promotional material and so far this year, Defaqto has licensed the use of 140 Five Star Ratings.

Brian Brown, Head of Insight at Defaqto said: “A Five Star rating enables companies to demonstrate to consumers that their products have reached the highest tier of quality. The rating, with its associated logo, is becoming a well-known statement of product quality in the market as more and more companies adopt it into their marketing plans.

“With the ever-growing emphasis on product cost, product quality has been in danger of being excluded from the purchase decision. A Five Star Rating helps to address this imbalance by identifying for consumers products which have been independently assessed for quality.”

Main Star Rated Product Groups
Credit Cards Current Accounts Home Insurance Motor Insurance
Pet Insurance Travel Insurance Payment Protection SIPPs
Offshore Bonds Onshore Bonds Critical Illness Income Protection

-Ends

For further information contact:

Defaqto Limited
Brian Brown, Chris Johnston or Luci Mylward
01844 295 454

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Defaqto issues new free multi-manager investment guide

February 25, 2008 | posted by Luci Mylward in Insight, Investment, Press Release | comments (2) |

Defaqto’s independent updated guide designed to help financial advisers improve their understanding of multi-manager fund management has just been produced and  is downloadable free of charge from: http://tinyurl.com/2f623bCalled “Blending Talents1: A guide to multi-manager investing in the UK”, Issue 6,  Defaqto’s latest guide explains how the different types of multi-manager funds can work for financial advisers and their clients. It is also designed to deepen appreciation of the various ways in which multi-manager funds are managed and the report provides a template which if followed by multi-manager fund managers will ensure that advisers will be able to place the appropriate funds in front of their clients.

The guide is issued at a time when the level of fund manager moves in this section of the industry has been unprecedented and it contains the full listing of fund manager moves in 2007.

The guide enumerates the advantages to the adviser of outsourcing  investment decisions to multi-manager investment specialists including how this can help improve client relationships and increased business levels.

Fraser Donaldson, Principal Consultant - Investments at Defaqto and co-author of Blending Talents, says: “With upwards of 300 multi-manager OIECs and unit trusts in the UK, advisers can be overwhelmed by the amount of information they would otherwise need to research without a guide like ours to help them. By following the route map to successful investment selection that the guide provides, advisers will be well placed to meet their customers’ requirements appropriately and with confidence.”

The guide is available as a free download from the Defaqto website at: http://tinyurl.com/2f623b

-Ends-

Notes to Editors:

The guide “Blending Talents” is sponsored by AXA Framlington, Cazenove Capital Management, Credit Suisse Asset Management, Fidelity International, MLC and Schroders.

For further information contact:

Defaqto Limited 

Fraser Donaldson, Chris Johnston or Luci Mylward

01844 295 454

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Free Defaqto report shows how IFAs rate investment providers for service

February 14, 2008 | posted by Luci Mylward in Insight, Investment, Press Release, Service | comments (0) |

A new report  Investment Service 20081 is the third annual investment study from Defaqto into how IFAs rate provider service levels.The report is downloadable free of charge at: http://defaqto.com/report

Based on research among 500 IFAs2, it identifies what IFAs consider the most important service functions from the 32 examined, how well each provider performed when the service functions were grouped into nine benchmark categories and which companies were the top three preferred providers in each main type of investment contract.

Also the report  measures how well the industry as a whole is meeting adviser expectations across the nine categories. The findings indicate that in some important service categories the industry is falling short of expectations.

Another important section of the report includes a Defaqto critique of the service levels of the eighteen  providers profiled, often comparing their situation with how they performed last year.

Ben Heffer,  Principal Consultant - Service  and author of the report said: “The report addresses the difficult area of quantifying IFA levels of satisfaction with investment product providers, but because of the large number of respondents and the depth of the research, we are very confident in the findings.”

Providers wishing to understand in detail exactly how their individual service levels are regarded by IFAs and how these compare with the industry average, can purchase a further bespoke report derived from the very substantial market research study that is the basis of this report.

                                                                                     -Ends

Notes to Editors

1 The Investment Service 2008 is available free of charge from: http://defaqto.com/report  For further information, please contact Ben Heffer on 01844 295447.

2Fieldwork was undertaken by W A Taylor and Associates during December 2007 with 500 randomly-selected IFAs by one to one telephone interviews

For further information contact:

Defaqto Limited
Ben Heffer, Chris Johnston or Luci Mylward
01844 295 454

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Bank distribution tie-ups back on the menu

February 8, 2008 | posted by Matthew Ward in Banking, Insight, Investment, Pensions | comments (1) |

This week’s L&G and Nationwide announcement which confirmed a distribution tie-up for pensions, investment and protection products is sure to create a stir within the industry. From a pensions point of view this move represents the first banking and life office tie-up for a while and would seem like a very logical and shrewd progression for these companies with the way that the distribution market is moving.It also brings together two strong and trusted consumer brands. Both L&G and Nationwide figured in the top 20 most trusted companies as selected by consumers in research carried out by GfK NOP for Defaqto’s Retirement Savings & Income report 2007. Defaqto asked 1,000 consumers to state which companies, from a pre-defined list of financial services and retail brands, they would trust with their retirement savings. Nationwide and L&G figured prominently, ranking 4th and 16th respectively.In the proposed distribution landscape mapped out by the FSA’s Retail Distribution Review, high street banks in the UK would seem to be set fair for key involvement in providing consumers with affordable access to savings advice and products.

The L&G and Nationwide announcement signals an early example of major UK institutions paying heed to the future of the distribution market and Defaqto would expect to see similar new deals announced or existing relationships embellished in this area. 

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FTSE fluctuations likely to put off private investors

February 6, 2008 | posted by Chris Johnston in Insight, Investment | comments (0) |

The hefty swings witnessed in the FTSE 100 index in recent times are doing nothing for the confidence of the ordinary investor. All it seems to signal is that investing in top UK registered companies is nothing other than a lottery.

Most of us were brought up to believe that investment in stocks and shares was for the long term. We also thought that the stock market was an accurate leading economic indicator as it focused at least six months ahead and had already discounted the likely future events in its stock pricing. Not so now.  What we are witnessing is reminiscent of a herd of wildebeest on the open plain, sniffing the breeze for the slightest whiff of trouble and then when they sense it, stampeding in the opposite direction. 

How is the small investor supposed to have the slightest confidence in the market in these circumstances? We have always known that the herd instinct was a powerful factor in market movements, but the recent volatility in the markets has exposed the degree to which they are now operating to the shortest of timescales and on the flimsiest of indicators.

While these conditions remain, ordinary punters’ faith in the whole system will remain very jaundiced and only a sustained bout of sanity will be enough to entice them back in. 

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Defaqto announces new star rating procedure

February 1, 2008 | posted by Luci Mylward in Banking, Insight, Insurance, Investment, Pensions, Press Release, Protection | comments (0) |

Defaqto today announced the introduction of a new procedure for star rating personal financial products. Over the past seven years Defaqto has been producing star ratings for a wide range of financial products.  During this time, the process was based on products being scored for their quality against a set of product criteria using Defaqto’s unique Product DNA1 process which is built into the Aequos database. Depending on the scores achieved, products were located in one of five star categories, with Five Stars being the top rating and One Star the lowest rating.To get into the Five Star category, a product had to be scored within the top 10 per cent of all products. For Four Stars, products had to be the next 15 percent of products, for Three Stars in the next 25 percent and so on.

Star ratings for different product groups were produced over the course of a year for inclusion in the publication of the relevant Defaqto Insight market report.

During 2007 Defaqto underwent a review of its rating procedures and decided that in future it will produce all star ratings on the same day - 1st February - and that these ratings will apply for the 12 months to the end of the following January. As well as the revised schedule, the methodology for deciding on product ratings has been improved by Defaqto’s product experts, from being a relative comparison to becoming a set of absolute ‘bars’. As part of the new rating, Defaqto has stipulated that before a product can be rated as Five Stars it must provide some level of cover or benefit in a number of key areas.

These changes will give product providers distinct advantages over the current system:

  • Getting a Five Star product rating will no longer depend on how many other Five Star rated products exist.
  • Providers will know that if their products meet or exceed the top bar for quality, they will be rated Five Stars.
  •  Providers licensed to use Defaqto’s star rating logo will be able to use the logo more effectively, knowing it relates to the current year and the first month of the next year.
  • Providers can develop products over the course of a year knowing in advance the criteria used to score product quality and what the star rating boundaries are.

The research methodology together with the features and benefits used by Defaqto in calculating each product’s scores, as well as the boundaries for each star rating, are produced within the relevant Star Rating Report 20082 publication.

Commenting on the change, Brian Brown, Head of Insight at Defaqto said: “We  believe that these changes will bring greater certainty to providers both in terms of the development and marketing of their products as well as enhanced confidence in the star ratings themselves among consumers.”

                          

-Ends-

Notes to Editors

1 Product DNA - Product Data Numerical Analysis

2 Reports for the different product areas entitled ‘Star Rating Reports 2008′ are on sale priced £850 plus VAT each for a PDF version with discounts available for subsequent purchases . For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

For further information contact:

Defaqto Limited 

Brian Brown, Chris Johnston or Luci Mylward

01844 295 454

Star Rating Reports 2008

Number of Features or Benefit Criteria Scored

Features or Benefit  Criteria Essential for Five Star Rating
Home Insurance

 

 
Buildings

23

9
Contents

40

12
Motor

 

 
Comprehensive

44

8
Motorcycle

29

5
Travel

 

 
Annual Travel

29

12
Single Trip

27

12
Gap Year

29

8
Long Stay Travel

29

8
Payment Protection

 

 
Personal Loan PPI

24

7
Credit Card PPI

24

9
Mortgage PPI

24

7
Pet

 

 
Cat

24

5
Dog

26

6
Critical Illness

 

 
Stand Alone CIC

23

0
Level Term CIC

24

0
Decreasing Term CIC

24

0
Income Protection

 

 
Income Protection

16

0
Offshore Bonds

 

 
Guided Architecture

21

0
Portfolio Bonds

21

0
Onshore Bonds

 

 
UK Unit Linked Bonds

18

0
Sipps

Features, Benefits / Costs

Features, Benefits / Costs
SIPPs

19 / 8

0
  

 

 
Current Accounts

34 / 43

3 / 0

 

 
   Credit Cards

 

 
Credit Cards

19 / 27

0 / 1
Offset & Current Account  Mortgages

 

 
Offset & Current Account Mortgages

45  / 24

3 / 1
Equity Release

 

 
Lifetime Mortgages

53 / 27

1 / 1*

 1* - One cost feature the product must not have to achieve Five Star N.B. Where no essential criteria is listed this is because it is included in the standard criteria

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Don’t say you weren’t warned! The FSA lays it on the line

January 30, 2008 | posted by Brian Brown in Banking, Insight, Insurance, Investment, Pensions, Protection | comments (0) |

The FSA has today published its Financial Risks Outlook 2008 report (PDF Download), which sets out the FSA view on the UK financial markets, and where it sees potential risks.

Not only does this report provide an excellent summary of where the world economy and the UK within it appears to be at present, it also discusses the FSA’s priority risks for this year.

It’s not a light read - 70 pages of quite detailed content - but there is an extensive section titled “Industry Focus” which sets out the FSA’s thoughts on what it sees as risks in each financial area.  And some of it makes for quite worrying reading for those involved in financial services.

Leaving aside the massive problems with consumer lending the report also includes some pearls which should guide industry leaders in their future dealings with the FSA, and clearly states where the potholes are.  Non-subtle pointers include: (more…)

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Defaqto QuantRater - January 2008 update

January 24, 2008 | posted by Fraser Donaldson in Insight, Investment | comments (0) |

The Defaqto QuantRater - used by many advisers in creating portfolios for their clients - has had it’s quarterly review.

The rating can be found through an easy sift in Aequos Engage for both unit trusts/OEICs and for life and pension funds. Wherever there is an investment link to a product, the QuantRater can be found.

Funds are reviewed at the end of March, June, September and December and a list of the unit trust/OEICs that achieved a rating of 4 or 5 are shown on the attached lists (listed by ‘IMA Sector‘ or by ‘Provider‘).

A Fact Sheet and Technical Guide explaining the rating is also attached for your use.

On 25th January a number of changes take place to the ABI Life and Pension sector criteria. The changes will be reflected within Aequos Online and Aequos Engage from that date and you can view them via this link.

We hope you find this information useful,

The Defaqto QuantRater team

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