As from 30 October 2008, we have temporarily withdrawn the Riley bond from the market. The cost of the protection provided by Riley is a critical component in the construction of the bond. The recent extreme and unprecedented levels of stockmarket volatility have resulted in a significant increase in the cost of protection. Although the terms do reflect the fair market price for protection, nevertheless in the extreme situation of recent weeks the suitability of an investment in Riley, relative to a deposit investment, becomes difficult to justify.

What price protection?

The Insurance Fund has one real purpose, to make up any shortfall if, on the insured date, the value of the Stockmarket Fund has fallen below the protected amount.

Put simply, let’s say your client decides to invest £15,000 and sets a protected amount of £15,000. On the insured date the Stockmarket Fund is worth £13,000, which is less than the protected amount. The Insurance Fund is designed to pay out the difference of £2,000 so that the protected amount of £15,000 is paid out.

 

On the other hand if, on the insured date, the investment in the Stockmarket Fund is worth more than the protected amount, a payment from the Insurance Fund won’t be required and your client will receive the value of the Stockmarket Fund.

However, this level of protection has a cost. As with any investment, the more the risk is reduced, the more the potential rewards are
reduced. Look at the facts. The higher the protected amount, the greater the allocation to the Insurance Fund. So, less of the investment will be allocated to the Stockmarket Fund. And it is, of course, the Stockmarket Fund that carries the potential for long-term growth. So putting more money into it is what increases its future growth potential.
Riley holding umbrella

Riley is a life insurance bond for a minimum investment of £10,000. Your clients may not get back the full amount of their investment.

Remember that tax is payable on the bond and this could reduce the amount your clients get back. The above example has been used to highlight some of the benefits of Riley, but it does not cover all the opportunities or risks of investing in a Riley bond.