Page 3: The product
Before committing itself to the new product, Family Assurance needed to understand the scope of the project fully. In particular, the following questions needed answering:
- Is the product relevant to the target audience? (particularly to members investing for the young)
- Is the ‘Offer’ relevant to the distribution channel? (could it be sold through Family Assurance’s existing sales channels - or would new channels be necessary?)
- Does it compete with any existing Family Assurance products?
- Does the new product fit with Family Assurance’s corporate identity and ethos?
- Is the timing right?
- What is the competition doing?
- What is the expected lifecycle for the product?
- What resources need to be committed to the new product? Are they available?
Clearly, this in-depth understanding of a product and the implications of launching it, is relevant to any form of business wanting to move into new product lines. When launching any new product, the key question is: ‘Is it feasible?’ For this Unit Trust, the key questions were:
- How many people are likely to apply for investment into the Unit Trust?
- How would they be prepared to pay into this Trust? (e.g. in small instalments or larger lump sums?)
- How much would investors be prepared to pay into the Trust?
- How long would they want to invest their money for?
As with any other business decision, it is necessary to calculate whether revenues will exceed costs. Family Assurance needed to have a clear idea of how much each policy sold would contribute to the Society’s profits. If the sums did not add up, it would have been pointless to go ahead with the new venture.
Making the decision - bringing the product on stream
Family Assurance launched the Children’s Ethical Trust to fill an identified gap within the market. Research confirmed that the Society’s Junior Bond, was a popular investment product for parents, or grandparents, who wished to invest for newly born or very young children.
In contrast, the product was not as popular with those wishing to invest on behalf of older children. The possible reasons for this are:
- If the child is older, perhaps a teenager, the investor may require the proceeds of the investment for a specific purpose, for example, education. The minimum 10 year term of the Junior Bond could make it inappropriate for this specific purpose if the monies were required at an earlier stage.
- Some investors may seek a more flexible product for older children, so that they are free to pay the amount they want, when they want. This is not possible with the Junior Bond because its friendly society tax exempt status restricts the amount which may be invested.
So, the need for a product to supplement (but not compete with) the existing Junior Bond was identified. Another significant fact to emerge was the comparatively low number of ethical investment products available, many of which were perceived as producing poor investment performance. Furthermore, it became increasingly obvious that young people and their families had real concerns about environmental issues.
Family Assurance was delighted to be asked to take responsibility for the management of The United Charities’ Unit Trust in 1993. In March 1996, it introduced ethical criteria into the Trust’s investment strategy. To reflect this element within product ‘positioning,’ the children’s investment was marketed under the brand ‘The Children’s Ethical Trust.’ By identifying the need to provide an investment for its customers’ older children; recognising the need for a sound performing ethical trust and bringing these two important requirements together to fill a gap in the market, Family Assurance has provided a new, relevant product for its members.
The United Charities’ Ethical Trust is an authorised unit trust. A unit trust is a pooled investment scheme that allows investors to buy shares in a number of different companies. The fund is divided into units. The value of units will fall and rise in line with the individual investments within the fund. Historically, investment in shares has produced excellent long term results. The United Charities’ Ethical Trust aims to produce long term growth but will not invest in companies that do not meet established ethical investment criteria.