There was a style of shirt much favoured in the 1970s. As a teenager in the UK I used to see it frequently on television crime shows like The New Avengers and The Sweeney (both of which were shown in SA, despite the boycotts.) I didn’t expect to see that style again, until I met my compatriot, David Lloyd. Perhaps it was his Heritage Day outfit. Intriguingly, with his retro vibe, Lloyd runs a business called Liberty Innovate. And I think he is proving to be a good choice at bringing Liberty out of, well, the 1970s.
For many years the group was paralysed by the cult of its founder, Donald Gordon, and the success of the products offered in his heyday. What worked 40 years ago is hardly relevant today. Lloyd has also been fighting the perception that insurance-based investments are demons while unit trusts are angels. I must plead guilty to spreading that view right from the early days of the linked-product companies 20 years ago. Not that life assurers made themselves easy to like, with their hidden charges and arrogance.
Steven Braudo, the previous head of Liberty Retail (now clunkily called Individual Arrangements), told me that there was no point in life offices duplicating what unit trusts do.
Life companies need to exploit their unique features, such as the ability to offer guarantees. When Bruce Hemphill was head of Liberty he set up Libfin, a quasi-merchant bank, in the face of much scepticism, some of it from the Financial Mail. But it is an invaluable resource for Lloyd and his team as they build a new product set.
I have yet to be convinced that Lloyd’s breakthrough product, the Evolve five-year investment, is in the interests of the client. Liberty takes any market growth above 13%/year for its own account, yet it doesn’t give clients a floor (minimum return) nor any form of high watermark. But Lloyd is a veteran life marketer, and financial advisers love Evolve as they don’t look much further than its core promise: it will not charge fees until the 13% target has been reached.
I can forgive Lloyd for his so-so debut, as the second and third major products are much better. The second is the Agile retirement range, which in part is like any other retirement annuity, but in another section the client can invest in a product called Exact. This guarantees a specific income on retirement — one that is not dependent on changes in annuity rates or market levels. There is much academic research, pioneered by Prof Robert Merton, to show that income in retirement should be the focus, not the final lump sum.
To complete the trifecta is the macho-sounding Bold linked annuity. I am delighted that this product, unlike Evolve, makes use of high watermarks, and the guarantees can be used on more than 160 products, most of which are not in Liberty or Stanlib portfolios. There is an 80% high watermark guarantee, which means the portfolio value can never fall below 80% of its high point. Once the portfolio gives an aggregate return of 25% from the beginning of the period, the portfolio can never fall below its opening value.
Lloyd rightly says that because many retirees cannot stomach the possibility of large falls in value, they do not invest enough in equities. Many might as well take a fixed life annuity as it would give them a better income than a poorly structured living annuity. The Bold guarantee costs 1% and it takes a hedge fund-style 20% of the return over 14%. But that is a bargain compared with what the legacy smoothed bonus products at the former mutuals charge.
And at least the new Liberty products are interesting and well-presented.