I'm working in Spain this week and have been advising a new client on how to invest their spare capital. Having done our research it was clear that one of two 'Spanish' bond providers would be best, so we put together a portfolio for him and requested the illustrations.
The first provider can only produce a generic illustration - so no details of the funds or their charges and thus about as much use as a concrete trampoline. Their illustration assumed growth rates of 6% and 8% per annum. The other provider listed the funds and used growth rates of 5, 7 and 9% per annum. Apparently, neither provider can change their projection rates making a straight comparison virtually impossible. A little further digging and I found that both providers had completely ignored the underlying fund managers's annual charges (part of which they receive) when producing the illustration, because the client isn't in the UK and so they can get away with it.
I wonder what they expect me to say to the client - perhaps 'here is a misleading illustration designed to make Company X's bond look cheaper than most of the others'. I don't think he'd be very impressed - do you?
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