There is growing demand among advisers for onshore open architecture bonds, with 85% of advisers using them, according to Defaqto’s latest bond review.
Annuities and more sophisticated investment products also saw a rise in interest the annual Investment Bond Service Review for 2023 shows. It found that the trend for open architecture products over restricted products has continued, while onshore has become preferential to international.
In 2018, international bonds were found to be the most popular but demand has fallen 5% over the past year, Defaqto said, while the popularity of onshore open architecture bonds has increased by 3%.
According to the financial information and ratings group, more than 85% of advisers are now writing open architecture onshore bonds and two thirds (66%) are writing open architecture international bonds. In comparison, restricted architecture onshore products were used by 53% of advisers, while restricted architecture international bonds remain the least popular with a low take up of less than 20%.
The report also showed reduced appetite for pensions, investment ISAs and unit trust/OEICs, while annuities and more sophisticated investment products have seen an up-turn in interest.
Ben Heffer, insight consultant at Defaqto, said: “The growth we see in annuities is likely in response to improvements in rates, a more cautious attitude to risk post-pandemic and the cost of the living crisis. However, it would be premature to think that advisers were significantly changing their financial planning habits.
“We assume that pensions and ISAs will remain the first choice for clients’ investments for years to come alongside any bond recommendations that advisers might make.”
The report found that Prudential was the most popular provider, with 39% of advisers recommending its bonds to clients. In contrast, Aviva, Canada Life, Quilter and LV= appear to have lost traction, with support from 20% or less of advisers. The only providers to have increased their level of support are HSBC Life and Foresters Friendly Society, Defaqto said.
Commenting on international product popularity, Heffer said the withdrawal of Quilter from the offshore market has benefitted other main providers, with Canada Life International and Prudential International topping the table.
He said: “In 2021, 18% recommended Quilter but since their exit, Canada Life International has seen an increase in support of 12% from advisers whilst Prudential had a significant surge of 21%. Other brands, including Standard Life International, also appear to have benefitted.”
In total, 19 providers received sufficient adviser nominations as preferred providers to be awarded a Defaqto service rating. Ten were onshore and nine were offshore.
