Ron Sandler is in the news again with his proposals to reform the with profits marketplace and the products on offer.
With profits funds have long been the subject of debate as many companies keep secret the way in which the fund is operated. With profits funds generally invest in the stock market, property, cash and other investments. Profits made on the investments are calculated each year and only a proportion is paid out as a bonus. The rest is retained. This allows companies to pay out bonuses in good and bad years and tends to iron out the fluctuations associated with stock market investing.
Mr Sandler has proposed that these products become more transparent so that investors can understand how they operate. He also proposed that they should have explicit charges so that comparison with other companies would be easier. Investors would then be able to see the actual value for money of the investment.
Mr Sandler's proposals will have to be run by the industry regulator, the Financial Services Authority and much consultation on the issue is expected over the coming months.