Bonds Still A Popular Choice with Advisers

by | Oct 28, 2019

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Bonds
  • The majority of IFAs (77%) write onshore bonds
  • Around one in five (20%) would prefer to write international bonds
  • Bonds would be considered more attractive to advisers if they were more transparent and could be linked to investment platforms

Bonds remain popular among financial advisers, with the number writing bond business holding steady over the past twelve months, according to Canada Life.

 

Less than a quarter (23%) of financial advisers are not writing any onshore bonds, a marginal fall from 24% in 2018. Among this minority, the main reasons for not writing any onshore bonds include a preference for wrapped investments (46%) and the perception of high cost (26%) of such products.

 

Onshore bonds continue to be the preferred option for financial advisers, with just one in five (20%) stating that they would prefer to write international bonds. There has however been a small upward trend in the number of financial advisers writing international bonds in recent years, rising from 18% in 2018 and 17% in 2017.

 

Three in five (60%) financial advisers agree that onshore bonds play an important role in the advice they give to clients, while over half (56%) think that they are more useful than most advisers believe.

 

Onshore bonds play an important role in advice given to clients Onshore bonds are more useful than most advisers believe Prefer to use international bonds rather than onshore bond
Agree 60 % 56 % 20 %
Disagree 19 % 9 % 45 %
Neutral 21% 35% 35%

Figure 1 – Adviser perception of onshore and international bonds

 

Onshore bonds – an image problem?

 

Despite this, some advisers consider onshore bonds to have an image problem. Nearly two thirds (63%) believe that some advisers will not consider writing onshore bonds because they are perceived to be old fashioned.

 

Meanwhile, a third state that some financial advisers do not consider onshore bonds because they have high charges (33%), are not tax efficient (32%), and have a limited range of investment options (31%).

 

In terms of addressing this image problem, over half (56%) of advisers argue that onshore bonds would be a more attractive proposition if there was more information regarding taxation. Meanwhile, in keeping with the ongoing digitalisation of the wealth management industry, a similar number (54%) state that these bonds would be more attractive if they could be linked to a desired investment platform.

 

Neil Jones, Tax and Wealth Specialist at Canada Life, said: “Onshore bonds remain a popular option for the majority of advisers who recognise their value as an important investment option. In many ways, bonds act as the bedrock for client portfolios across the industry.

 

“However, onshore bonds do have an image problem in some areas of the market. They are seen as old fashioned and have a perception of being expensive, which is not necessarily true. Their benefits – such as deferring income tax and the ability to use top slicing relief – are perhaps overlooked. With no end in sight to the current turbulence impacting global markets, advisers looking for a sound option for their clients should seriously consider the inherent value in writing bond business.”

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