The arrangement, which Axa execs believe may be a first in the offshore bond industry, was quietly launched this week, according to Axa Wealth International sales and marketing director Richard Leeson.
Under the offer, clients who invest a minimum of £25,000 in a new Evolution bond before the end of October, and put it exclusively into Architas funds, will not have to pay any quarterly management charge at all, as long as the policy remains invested in the funds which meet the discount deal’s criteria. (See box, below.)
A normal quarterly management charge would be 0.15% on an initial premium of £25,000, falling to 0.125% on an initial premium of £50,000, Leeson said, with the result that the savings, after five years could be as much as £2,000.
Investors would still be liable to a quarterly administration charge of £20.50 per quarter.
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Initial premium
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£25,000
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£50,000
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£100,000
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Normal quarterly management charge
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0.15%
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0.125%
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0.10%
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Charges saved by not having to pay a quarterly management charge, over five years
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£750
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£1,250
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£2,000
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The offer applies to new clients only who invest in the Axa Wealth Evolution bond, an offshore, single-premium investment product, and is due to run until 31 Oct, at which point Axa will take a view whether to continue the arrangement, Leeson said.
Response to research
The decision to create the Evolution bond/Architas arrangement came out of Axa research earlier this year, which found that many UK financial advisers regarded offshore bonds as expensive, particularly for investors with relatively small sums to invest, Leeson said.
“At the moment, out of the 27,000 IFA firms in the UK market, only 3,000 deal regularly in the offshore [bond] market," he added.
“So by coming up with this arrangement, Axa has created what amounts to a low-cost, open architecture deferred bond – a ‘starter offshore bond kit’ if you will, that investors may add to later, and switch to an open architecture structure if desired, as their wealth grows.”
Leeson said Axa has been helped inadvertently by the UK Financial Services Authority.
“Two weeks ago, the FSA came out and said that under their definition of [independent advice], post-RDR, IFAs will have to look at offshore bonds, if only to discount them as unsuitable for that particular client. They can’t ignore them."
Axa Wealth International is a UK-based wealth management arm of the PAris-based Axa Group insurance giant.
