The health insurer says investors in its new VitalityInvest fund range, launched on Monday, will enjoy reduced fees if they participate in healthy activities. The discount can reduce the customer’s monthly product charge to as low as £0 for healthy living.
VitalityInvest will offer an active funds range and a multi-asset risk-targeted funds range using tracker funds. Investec Asset Management will help run the active portfolio, while Vanguard will manage the passive portfolios with input from Dynamic Planner.
In addition to the so-called healthy living discount, investors receive a booster from Vitality for investing over time horizons longer than five years and are awarded annual boosts in their retirement drawdown pot of up to 50% of income drawn.
The adviser-only offering is launching a stocks and shares ISA, a junior ISA and a retirement plan.
Gimmick
Mike Barrett, consulting director at the Langcat, said: “I think there’s an element it feels like a little bit of a gimmick, trying to stand out from the crowd rather than just doing a set of funds.”
However, NextWealth founder Heather Hopkins said the widely-anticipated launch is consistent with Vitality’s objective to help people live better for longer.
“Vitality is well known for rewarding good health decisions and it seems like a natural extension to reward good financial decisions,” Hopkins said.
However, Hopkins added that Vitality will need to tread carefully with its rewards and booster for good behaviour as advisers tend to recommend a portfolio of funds, not a single product for drawdown.
“But it’s early days for mass market deaccumulation and so behaviour may change as new propositions are introduced,” she added.
Crowded marketplace
Peel Hunt analyst Stuart Duncan said that while Vitality’s background means it has an existing client base to sell to, it’s entering a crowded market.
He said: “The fee structure and boosts to income are slightly different, but the broader difference will be what the underlying products look like.”
“Given the number of investment providers, I am not sure if other health insurers would follow – they are very different skill sets and probably need different infrastructure,” Duncan said.
But Hopkins said other firms have been trying to copy Vitality’s approach to reward good health decisions. “I don’t see a reason why they wouldn’t follow suit on this as well.”
Vertical integration
Barrett said Vitality is jumping on the vertical integration bandwagon.
He said: “We’ve always thought there’s kind of a trend for providers to effectively vertical integrate and offer a number of propositions, whether that’s investment, life insurance, retirement services, asset management – it’s increasingly rare that the big providers are doing only one of those things.”
