Investment bonds are marketed to savers who want secure, tax-efficient growth on their money. However, are they as genuinely as secure and profitable as they are made out to be?

Investment bonds are savings plans offered by Insurance companies ( sometimes in co-operation with banks) that represent a long-term investment which allows for limited access to one’s savings initially, but that provide growth in the long-term. They are a popular alternative to the uncertainty and insecurity of housing or direct stock market investments, especially for those wanting to supplement a modest income, such as those on a pension.

They are touted as a good way to get secure, long-term capital growth.

Investment bonds have been a popular success for investors and financial agents alike. Literally billions of pounds are invested in the product annually (although this trend has slowed as rival financial products have provided competition), as a result, many brokers who are compelled by the promise of commission seek to offer the package, whilst not explaining the risks in acute detail. This is something look out for, and to take very seriously indeed, as will be explained later.

The well-known “tax-efficiency” of the product is a key factor in its popularity, an attractive incentive for pensioners and other savers who want to be able to invest long-term. The income from the growth of the bond is not punitively taxed, and by putting one’s savings in IBs, because they allow for only limited access to funds, one’s normal tax status remains unaffected. If one has used up all their capital gains tax allowance, then investing in insurance bonds can be a good way to put money into a product that will shield it from CGT.

However, what detracts from the appeal of investment bonds is that there are other, arguably more tax-efficient investment packages available to savers: e.g. Unit Trusts and “Oeics”; and there is also the fact that whilst investment bonds do offer a yield, it is not always a spectacularly high one, given the time they take to reach maturity. The effects of inflation can further affect any gains made through this kind of investment.

Furthermore, those who use Investment bonds as a source of income will have to consider the income tax they will have to contend with, as opposed to the case of those investing in alternatives, who often only have to deal with capital gains tax- and then only above a certain threshold.

Whilst these are not strictly hazards for the investor, in terms of risk of capital losses, they do signify drawbacks to the product, in the form of disappointing comparative return for one’s input.

The very serious risks with investment bonds, however, are connected to the product being “mis-sold” by a broker, as a result of the agent being incentivised to get a client to invest against their interests, in order to gain a substantial commission. One of the main dangers in relation to this is when clients that are unfamiliar with financial jargon, or are not made fully aware of the conditions of their contract, unwittingly find that they drain their actual capital and lose the bulk of their savings. This can be because sellers emphasize the saleable, appealing aspects of the bond and skim over potentially problematic aspects of an IB deal. If someone offering investment management advice is reputable then they will always disclose their interests.

There are documented cases of sellers who have tried to present IBs, self-servingly or out of ignorance, as a universally-satisfying product for long-term savers whose needs could be better served elsewhere.

People have, for example, been offered an Insurance Bond deal that is a low-risk (i.e. lower yield) investment, but were encouraged to withdraw the maximum limit of capital allowed under contract (often about 10%) in the first years of the investment, only to find that the value of the fund had nosedived later.

As many investors in IBs are retirees, entire life savings can be at stake, or in some cases funds that are intended to be reserved for certain contingencies, such as in the cases of elder persons that may need to be taken into care later in life. A loss of such indispensible money would be tragic, although  avoidable, if only the customer was made fully aware of the nature of their investment, and advised fully on what they were getting into.

To avoid such terrifying possibilities it more than pays to always remember that if one is being offered an insurance bond, that you should try to fully understand all clauses and conditions of contract and remain instinctively cautious in your dealings with commission-hungry agents. Being “mis-sold” an insurance bond is a criminal offence and complaints should be taken up and pursued with unreservedly if you feel you have been wronged.

Having said that, bonds are not a faulty or ‘dangerous’ forms of investment, and can provide the excellent service that has made them so popular with customers as long as mis-selling is removed from the equation.

The world’s leading treasury management brand is Wallstreet Systems, and they have been creating solutions for treasury back office operations for 20 years.

Treasuries through the Years

Treasuries have been around for a long time. Back in classical times, the word treasury was used to describe buildings erected to contain gifts to the gods, such as precious items of gold and diamonds. The Siphinian Treasury was one of these ancient treasuries, with gold and silver votive offerings inside a structure made entirely of marble. Similar buildings were built in Olympia, Greece by the competing city-states to impress each other during the first Olympic Games.

Nowadays, a treasury has grown to mean a government department related to finance and taxation. It can also refer to a bank treasury or a corporate treasury as well. A treasury will always need a manager, entitled a Treasurer or a Minister of Finance, to oversee the management of the assets.

The Advantages of the Modern Age

One of the best things about being the manager of a treasury in this day and age is that technology makes this important position so much simpler. Rather than having to manage a huge treasury for a country, large corporation, or bank without the help of computers or software, these days we can rely on these inventions to help us do the job. Computers help us with this task in so many ways, that we sometimes wonder what we did without them.

A Software Solution

One of the best software available on the market today for the management of a treasury, is Wallstreet Systems Treasury Management Software. This software is specially developed for the back office operation of a corporate treasury, bank treasury or other such situation.

This technology simply makes managing a treasury much easier, by providing a streamlined process for cash management, risk management, accounting and more. It’s interface offers deal capture, rate feeds, bank connectivity, bank relationship management and hedge account on demand, which makes it more cost effective.

Using the In-House Banking feature, organizations can use their internal bank accounts to reduce the need to make International payments. All data in the system is extracted to the Global Data Warehouse for Total Treasury Transparency, which means that any member partner can view all interactions. Bank connectivity is fully automated, with one connection, making payments and trade confirmations incredibly easy.

Modern treasury management software such as Wallstreet Systems serves to eliminate the confusing burden of IT and allow the treasurer to focus on the core of their business.

Treasuries have certainly come a long way from ancient Greek buildings stuffed with gold and silver. With technology continuously developing and software solutions such as Wallstreet Systems available, managing a treasury is becoming easier than ever before.

Starting one’s own business is a courageous act. Fortune may favour the brave, but in order to realise your ambitions common sense, informed decisions and a good plan are essential. Make sure you seek good advice and most importantly, have everything you need.

Before starting up a business, as a first step, it is sobering but truly necessary to ask yourself: is my plan realistic? In order to see one’s dreams through to completion, having an idea that is do-able and not simply an exciting prospect is essential.  Consider whether there is a sustainable income available to you in the field that you are entering into, and whether you can fight off competition and ensure growth. If you cannot comfortably foresee that these are likely, it is worth waiting before risking your money and time; patience, and putting matters on hold for a time will pay dividends later if it means you are likely to enter the world of business in a stronger, less insecure position than at present.

Determining certain factors will help you gauge where you stand: analyse your financial situation with discipline- realistically tote up overheads against projected sales revenue to see if you really are going to be able to sink or swim. If it is looks too tight, don’t risk it.

The next step is the planning stage, at this point you will need to seek advice from the right quarters: independent financial advisors, from trusted friends, accountants, lawyers and worthy literature on the subject, for example.

Issues worth examining at this stage (that indicate questions that you may also want to ask) include what protection from personal liability you may need, which all depends on your business’ risks; how you expect to be taxed; what sort of ownership structure you will be registering (i.e. Partnership, sole proprietorship); whether you want a website and if there is a domain name available for your company that is in the name you want.

Besides having a good business plan and a sensible start up fund for your business, you will need to consider other requirements and organise yourself in key areas before you register the project.

You will need to prepare organisational paperwork: this depends on your ownership structure- the forms and laws you will need to attend to will differ if you are an LLC (or, limited company in the UK and elsewhere), partnership, corporation, or self-employed. For this, it is valuable to be as informed as possible about the laws that will directly affect your business, and to get sound advice from experts.

You will need to have clearly chosen a location that is affordable and appropriate for your business- and to investigate the small print of any commercial lease that you may be offered.

You will also need to investigate the permits or licences you will need in order to go about your business. This will depend on the nature of your trade and the services you offer: e.g. if you want to open a book shop that differs from a liquor store in terms of what licences you will need to obtain. Ask about this early, and know exactly what the costs and the laws are.

Following this, you need to think about insurance:  you may need to assess what you will need to insure i.e. vehicles, property, hazardous substances; also, homeowner’s and health and disability insurance may need to be considered, depending on your set-up. Contact a number of brokers and compare quotes, but never go without cover.

Accounting is another major issue to address. Work out long in advance of applying for any kind of loan you may want how you are going to audit yourself. Either get educated on how to do this yourself and purchase business accounting software, or get an accountant. Either way, make sure that you have this area under control; otherwise you will have difficulty securing loans or outside investment down the line.

On a practical note, make sure you obtain a legal calendar from your government’s Inland Revenue or tax department, and you are aware of deadlines and dates that will matter to you. Finding out that you owe money to the government when money is sparse is worth avoiding!

The most essential issue to address above all else, is capital. If you do not have the money that you will need to set things up in your business, you will have to turn elsewhere for a loan. This is not be feared, as it is the usual route for many just starting out in the world of commerce, nonetheless it can be a daunting task if you do not know how to go about it.

If you apply for a start-up business loan it is very important to shop around (as always) for the best deal that is suited to your unique set of needs. Make sure you know what they are really offering: don’t be tempted by banks that offer loans with short term benefits but long term headaches and severe penalties- think objectively about how your needs will be best served over the long run. Banks can be an excellent source of information for the  business start up.

Once you have found the right loan, to be able to gain approval and, moreover, get the best rates on your business start-up loan, you need to prepare a water-tight, sensible business plan. Such a plan will generally need to include a definition of your target market; the way you will attract business from your target market and also the nature of your services or products offered.

The next thing your bank or lender will be looking for is some kind of assurance about the likelihood of you being able to maintain a regular income from your business. Even if you look like you can tap into a niche market, you still need to come up with some contingency plans and show you have thought about being able to keep money going if the market takes a turn.

When you apply for a business start-up loan, the lender will look up your personal credit rating. Since you will control the books of your new business, the lender will check to see how well you have been able to control your own finances. Even if you do have bad credit, don’t be too disheartened, as you can still find some lenders out there that will help you out.

Make sure that once you have the money arranged, the books in order and all your insurance, legal, tax and other issues settled that you register your business with the government, and stick to your business plan, with Spartan discipline if necessary!