The industry regulator, the Financial Services Authority has been concerned about the transparency of how with profits funds are run for some time. They were worried that people could not easily compare with profits funds because the information about how they are run is not readily available. The FSA has said that by March 2004 all with profits fund providers must provide information about how their funds are run in order for investors to understand what they are buying.
Our View:
At a recent debate about what information should be given to investors about with profits funds, Norwich Union's senior actuary commented that the company was working with policyholders regarding the information they needed. However, he commented (and we agree) that too much information could be provided and actually confuse rather than clarify. The returns on with profits funds are based on many factors, including the returns fund providers make on their own investors. Investors do not need every piece of information available to decide whether or not to invest. With profits investing has been under debate recently regarding its value for money, especially in times of poor stock market returns. We believe that potential investors need to take advice when considering with profits investment. Whilst many people believe their money is not exposed to the stock market, it generally will be but in different proportions. This needs to be compared to other types of fund to invest in.