With profits funds and platforms may have seemed like unlikely bedfellows but changes have been happening in the market, says AKG’s Matt Ward.
As a concept with profits can tend to divide opinion but, whether you are a fan or not, the with profits market undoubtedly remains worthy of note as an ever present (and sizeable) factor in the UK financial services landscape.
AKG’s 2024 UK Life Office With Profits Reports shows that the amount of with profits business in-force remains considerable – with profits technical provisions totalled over £207bn at the end of 2023 [2022: £210bn].
And despite talk of its demise (certainly correct in terms of those funds in ‘run-off’), some facets of the with profits market continue to evolve, grow and modernise.
For a variety of reasons, including systems compatibility, with profits funds and platforms have seemed like unlikely bedfellows, but we have seen some notable developments in recent years as with profits fund providers recognise the increased distribution opportunities offered by platforms.
With profits funds that have been at the forefront of this evolution include those offered by Liverpool Victoria (LV=), M&G (Prudential), and Wesleyan.
The number of platforms now facilitating with profits, and smoothed funds, has risen steadily over the past three years to include:
abrdn Wrap; Aviva Platform; Fidelity Adviser Solutions; LV= Platform Services; M&G Wealth Platform; Nucleus Wrap; and Wealthtime Platform.
And we expect the number of platforms enabling these fund options to expand further in 2025 as with profits and smoothed fund providers target further distribution opportunities.
However, there is still work to be done once these platform links have been established by those aspiring to grow assets via this distribution channel. For example, in the MPS space, we’ve seen people facilitate platform links but then struggle to attract the desired level of asset flows.
The relationship between fund provider and platform requires work and collaboration, likely done across business development and marketing functions, to promote the benefits of the option to advisers.
Finally, and fundamentally, healthy discussion and debate will continue about the merits and role of with profits and smoothed funds in adviser investment strategies for clients, including retirement planning, and how this might work as a sole strategy or in tandem with other fund/portfolio solutions.
Main image: jason-fitt-mFg1DigE-Kg-unsplash
