67
CONCLUSIONS
It seems that when it comes to using
BPR products, the biggest consideration
for advisers is the individual client’s
situation - this consideration dictates if
BPR products are a suitable investment,
what suitable portfolio allocations
are and perhaps the BPR investment
strategy that is chosen.
Unsurprisingly, speed of relief and
ongoing access to funds (BPR’s
two big selling points) were cited
as common reasons for choosing
BPR as an asset class. However, the
investment philosophy and experience
of the investment team were the
biggest criteria when it came to
choosing a manager (but conventional
considerations such as costs and past
performance were not far behind).
Investment risk, liquidity risk and lack
of transparency around the underlying
investments were cited as the biggest
concerns with BPR, by both advisers who
recommend BPR and those who do not.
The qualitative comments we received
are summarised in the bullet points on
the right. Some of these might be so
obvious as to be truisms, and some are
contradictory, but then meeting the
needs of investors and advisers, and
balancing their conflicting requirements
are what the providers get paid for.
PROVIDER SURVEY
We undertook a survey of the BPR
product provider community to
establish how well they understand
advisers’ and investors’ needs, and
if there are any issues where the
perceptions or expectations of the buy
and sell side do not match.
The survey was sent to the providers
that were captured on our investment
register. We promised respondents a
hard copy of the report as an incentive
to participate in the survey and we had
16 responses.
INTENTION OF THE SURVEY
Our intention was to see how well
providers understood and met the
needs of advisers and investors;
whether they understand their
concerns; which factors they think are
most important when considering an
investment; the types of products they
structure; and the suitability of their
products.
We also used this as an opportunity
to gauge how they see the market
developing over the next five years and
what changes they think would improve
the marketplace.
SURVEY ANALYSIS
The survey included up to a maximum
of 21 questions and was ‘dynamic’ -
subsequent questions depend upon
previous answers.
Q
.
What segment of clients do you
believe BPR is suitable for?
The majority (75%) of BPR product
providers believe that BPR is a suitable
investment for both HNW/Sophisticated
investors and ordinary retail investors,
mirroring what advisers think.
Taking both these results together, it
would seem that the consensus is that
BPR meets the needs of ordinary retail
investors and not just HNW investors.
Q
.
What % of a client’s total portfolio do
you believe is suitable to be placed in a
BPR product?
93% of the product providers believe
the percentage of a client’s portfolio
that should be placed in a BPR product
depends on their specific needs. Each
responded that age, health, attitude
towards risk, the size of their estate,
and wealth should all play a role in
determining the level of investment
for BPR. Again, this mirrors the
advisers’ responses and shows that
the individual client situation is the
overriding concern and there is no need
to be dogmatic about who should be
investing in these products and in what
amounts.
HNW Investors /
Sophisticated Investors
Ordinary Retail Investors
Both
0
%
“
The biggest consideration for advisers is the individual client’s situation”
25
%
75
%
It depends upon
the client
< 5
%
5-10
%
> 10
%
0
%
7
%
0
%
93
%
LESSONS FOR PROVIDERS FROM ADVISERS
Don’t claim the products are low risk, and then put in lots of risk warnings
in your brochures!
Be more transparent about your investment activity
Engage with the regulator and HMRC, don’t leave BPR qualification or
client suitability to chance
Lower costs
Decrease risks, improve liquidity
Do a better job of telling your story as an industry
Provide independent due diligence and verification of key points
Increase investor protections
Make it easier to carry out comparisons of the market
Provide a higher income yield
Conduct a consumer marketing campaign (not just advisers)
There is a cost (to clients) of doing nothing and needlessly paying IHT –
there is a need for these products
